Forex Insider Daily Update 15 June 2017

Major Bank Daily Position

USD/CAD - Crédit Agricole - LONG Limit Order - Placed - Entry: 1.3190, Target: 1.3800, Stop: 1.2950 (M/T)

USD/CAD - Crédit Agricole - LONG Limit Order - Filled - Entry: 1.3190 - Target: 1.3800, Stop: 1.2950 (M/T)

AUD/USD - Deutsche Bank - SHORT Limit Order - Filled - Entry: 0.7600 - Target: 0.7000, Stop: 0.8000 (L/T)

EUR/GBP - Citi - LONG Limit Order - Placed - Entry: 0.8775, Target: 0.9100, Stop: 0.8675 (S/T)

EUR/USD - Nomura - LONG Position - From 1.0845 - Adjusted - Stop from 1.1100 to 1.1145, Target: unch.

EUR/GBP - Citi - LONG Limit Order - Filled - Entry: 0.8775 - Target: 0.9100, Stop: 0.8675 (S/T)

USD/CAD - ABN-AMRO - SHORT Position - From 1.3455 - Adjusted - Stop from 1.3800 to 1.3455, Target: unch. (L/T)

EUR/USD - Nomura - LONG Position - From 1.0845 - Hit Profit-Stop at 1.1145 +300 pips

Danske

Danske warns of the risk that a perfect storm may hit USD liquidity in H2 2017.

“Besides Fed rate hikes and quantitative tightening the US treasury will likely soon begin to drain liquidity from the market, when a solution to the debt limit issue is found. US treasury exhausts it’s extraordinary measure possibly early autumn so Congress must either lift or suspend the debt limit soon to avoid a US government default.

As we expect a deal to be reached eventually, the US Treasury will likely to begin to rebuild its cash buffer (which aims at USD 150 – 450 bn) in late Q3 or in the beginning of Q4 this year, thus draining dollars from the system.

As the Fed may be too optimistic about its ability to shrink its balance sheets, we see a risk of the start of an unwarranted tightening of USD liquidity over the coming 3-12M depending on the timing of the start of the reduction. That should widen the EUR/USD XCCY basis and be a negative contributing factor for EUR/USD, especially now that 40% of the reduction is conducted by ceasing reinvesting mortage backed securities.

In line with this view, Danske stays tactically short EUR/USD in its portfolio for a dip below 1.1 in the cross over the summer driven by a Fed determined to move on with policy normalization and an ECB that could be side-lined for a while as inflation and Eurozone growth lose momentum.

SocGen

SocGen notes that US rates trundling slowly higher and bond yields firmly in a range.

“That level makes USD/JPY look a bit low and as markets calm down, the yen should weaken again. EUR/JPY remains a very attractive buy here. But the big market driver may be less where TIPS go than where yields go elsewhere.”

For now, EUR/USD seems to have a hard ceiling at 1.13 but if we see positions lighten up somewhat while meandering in the current mini range (1.115 – 1.13?) then we will make a base from which to push higher.

Nordea

Nordea comments on the outcome of today’s FOMC decision in which the Fed raised the Fed funds target by 25bps to a range of 1% to 1.25% and outlined how they will proceed with balance sheet normalization later this year.

Our view: with no major surprises from the Fed we stick to our forecast that the Fed will hike rates again in September and that the bank will start its balance sheet adjustment in December.

The risk to this call is that ongoing soft inflation prints delay the rate hike and subsequently the balance sheet runoff.