Forex Insider Daily Update 31 May 2017

Major Bank Daily Position

EUR/CHF - Citi - LONG Position - From 1.0910 - Closed at market at 1.0910 (TOTW-S/T) ±0 pips

EUR/JPY - Credit Suisse - LONG Limit Order - Filled - Entry: 124.15 - Target: 126.45, Stop: 123.35 (S/T)

EUR/JPY - Credit Suisse - LONG Position - From 124.15 - Stopped out at 123.35 (S/T) -80 pips

USD/JPY - Credit Suisse - LONG Position - From 111.65 - Stopped out at 110.85 (S/T) -80 pips

EUR/JPY - Morgan Stanley - LONG Position - From 125.15 - Adjusted - Target from 130.00 to 125.15, Stop: unch. (TOTW-M/T)

USD/CAD - TD Bank - SHORT Position - From 1.3700 - Adjusted - Stop from 1.3700 to 1.3600, Target: unch. (M/T)

EUR/USD - Crédit Agricole - SHORT Stop Order - Placed - Entry: 1.1130, Target: 1.0700, Stop: 1.1320 (M/T)

NZD/USD - Credit Suisse - LONG Limit Order - Canceled - Entry: 0.6975, Target: 0.7090, Stop: 0.6918 (S/T)

NZD/USD - UOB - LONG Position - From 0.7000 - Hit Target at 0.7090 (S/T) +90 pips

Major Bank Daily Analysis & Insights

Deutsche Bank

DB advices investors to start rebuilding short GBP positions against EUR and CHF.

“A market friendly UK election outcome already appears priced and the risks are now skewed to a disappointment. Whatever the outcome, we believe a strong conservative majority is a necessary but not sufficient condition for a smooth Brexit. Initial talks look fraught with difficulty and the European stance is hardening. GBP positioning is much lighter, the evidence for a consumer – led slowdown continues to build, and the Bank of England is likely to stay firmly on hold through the remainder of the year.

All this leaves inflows into the UK highly vulnerable to a rapid slowdown

BofAML

BofAML advises USD bulls to be patient following 5 reasons:

1.       It could take few more months for the market to move toward the Dot Plot. The June hike is not a given, in our view and to a large extent will depend on the data before the actual meeting, including the next NFP and wage earnings.

2.       It could also take few more months to know whether the US will reform its tax system and how. The USD roller coaster since the US elections to a large extent has to do with market expectations about chances of tax reform.

3.       We would expect ECB QE tapering to be a more important theme during this summer, ahead of the September meeting. Although our economists expect a very slow pace reducing the monthly purchases to 40bn Euro and stretching QE until the end of 2018, it will be hard for the USD to rally against the EUR before we get these details.

4.       Similiarly, BOJ will need to do more pushback against market expectations for early exit from yield targeting framework to persuade the consensus that the central bank will stick to it until inflation reaches its target, from currently negative core inflation.

5.       The market remains bullish EM. Although we have been flagging risks from stretched long positions in EM, our EM flows remain strong and investors buy EM dips when they get them.

As such, BofAML advises USD bulls to be selective and sell JPY, expecting diverging monetary policies, and GBP ahead of difficult Brexit negotiations.