Forex Insider Daily Update 29 May 2017

Major Bank Daily Position

EUR/GBP - Credit Suisse - LONG Limit Order - Canceled - Entry: 0.8540, Target: 0.8731, Stop: 0.8490 (S/T)

GBP/USD - Credit Suisse - LONG Position - From 1.2934 - Stopped out at 1.2844 (M/T) -90 pips

EUR/GBP - TD Bank - LONG Limit Order - Canceled - Entry: 0.8410, Target: 0.8740, Stop: 0.8300 (M/T)

NZD/USD - UOB - LONG Position - From 0.7000 - Adjusted - Stop from 0.6975 to 0.7000, Target: unch. (S/T)

Major Bank Daily Analysis & Insights

CACIB,Citi

CitiFX’s signals point to GBP and JPY selling, while CACIB signals point to mild USD selling across the board with the exception of the EUR where the model expects neutral USD buying against.

CACIB

Next week will likely highlight that the relative fundamentals in the US and Eurozone continue to support policy divergence between the FED and the ECB.

In particular, we expect that US labour market data will confirm that the economy is at full employment and continues to generate wage inflation. In the Eurozone, we expect HICP inflation to slow down, heralding a period of relatively subdued price pressure over the summon months.

In turn, this could usher in a period of EUR/USD underperformance in the coming days

Elsewhere, CACIB expects GBP to continue to struggle in the run up to the 8 June general elections.

Finally CACIB expects relative underperformance of G10 commodity blobk currencies on next week’s release of global PMIs which should highlight the increasingly divergent trends in the global recovery with the cyclical upswing in Europe gathering momentum while the recovery in China is losing more steam.

Nomura

Nomura notes that investors positioning in the EUR sends mixed signals:

“FX focused asset managers and equity investors are very long euros, while FX focused hedge funds and bond managers are very short euros. Superficially, the latter appear to be more important for turns in the euro which should support a bullish euro view.

One caveat would be that expectations of ECB tapering communication appear to be gathering around the upcoming ECB meeting on 8 June,” Nomura notes.

This, according to Nomura, could pose a short term downside risk to the euro but it should not derail the EUR medium term bullish outlook.

Nomura maintains a long EUR/USD position targeting a move to 1.15

SocGen

Socgen continues to track real yields fairly faithfully but right now that leave the dollar in no man’s land.

In that context, SocGen notes that the improving correlation of the euro’s TWI with real German bond yields.

“It’s more usual to see the euro TWi track EUR/USD, which in turn is more affected by US yields than European ones, but as the latter get stuck in a range, Europe matters more. With strong data and fading political concerns to go until the June ECb meeting, German real yields are on an uptrend, SocGen adds.

We worry that EUR/USD has run ahead of relative yields and has been supported by speculative adjusting from a big short to net long position in a short period of time. That could see positions cut back quite quickly.

Still, EUR/USD is a medium term buy and short term buy on a dip, SocGen argues.