Major Bank Daily Position
| USD/CAD - Deutsche Bank - LONG Position - From 1.3635 - Stopped out at 1.3570 (S/T) -65 pips |
| GBP/USD - Credit Suisse - LONG Position - From 1.2934 - Adjusted - Stop from 1.2759 to 1.2831, Target: unch. (M/T) |
| EUR/GBP - Credit Suisse - LONG Limit Order - Placed - Entry: 0.8540, Target: 0.8731, Stop: 0.8490 (S/T) |
| AUD/USD - Credit Suisse - LONG Position - Opened - Entry: 0.7435, Target: 0.7540, Stop: 0.7380 (S/T) |
| USD/CHF - Credit Suisse - SHORT Limit Order - Placed - Entry: 0.9810, Target: 0.9720, Stop: 0.9872 (S/T) |
| EUR/USD - Credit Suisse - LONG Limit Order - Placed - Entry: 1.1000, Stop: 1.0924 (S/T) |
| EUR/USD - UOB - LONG Position - From 1.1085 - Hit Target at 1.1200 (S/T) +115 pips |
| EUR/USD - Nomura - LONG Position - From 1.0845 - Adjusted - Stop from 1.0750 to 1.0950, Target: unch. |
Major Bank Daily Analysis & Insights
BTMU
BTMU FX Strategy Research notes that GBP attempted to regain some upward momentum after cable finally broke above key resistance at the 1.3 level creating scope for further modest gains in the near term.
Going into June-8 elections, BTMU thinks that the re-election of the current government is already largely viewed as a done deal by the financial markets, and as such it’s more a question of by how many seats the government will extend it’s majority.
“If confirmed by the election results, it could encourage a further modest strengthening of the pound. However, such an outcome should already be largely priced in thereby acting to dampen further fundamental support,” BTMU argues.
Thus, BTMU expects that GBP/USD could now re-enter the 1.3 – 1.35 trading range which persisted in the months following last year’s Brexit referendum, noticing that the bullish technical developments is helping to reinforce fundamental support.
Credit Agricole
Credit Agricole CIB FX Strategy Research notes that next week’s, the main focus data wise for EUR will be on preliminary April PMI releases for the month of April.
In that regard, CACIB expects incoming data to prove supportive to investor’s growth expectations but doesn’t see these release to have any meaningful impact on central bank monetary policy expectations or the single currency.
If anything, CACIB believes EUR should be predominantly driven by external factors such as global risk sentimens as for instance driven by further rising political uncertainity in the US.
“Should such uncertainity rise further we do not exclude additional upside risks in pairs such as EUR/USD. On the crosses, however, caution is warranted. This is especially true when it comes to pair such as EUR/JPY, where investors still seem to run a sizeable long position,” CACIB argues.
Credit Agricole CIB FX Strategy Research notes that US political risk is back to haunt USD yet again, sending it lower across the board.
In that regard, CACIB notes that they key question for the market remains “how much of the political headwinds are already in the price”.
While we believe that US political risk should ultimately blow over, chances are that it will remain an important driver of FX markets in the coming days.
Next week’s data calendar is relatively light and may not provide any distraction from the uncertain surrounding Trump’s Presidency at present. If anything, we expect data to highlight the improving cyclical outlook in Europe and Japan, which could help support JPY and EUR,” CACIB argues.
On Commodity FX, CACIB notes that with markets already expecting an extension of oil output cuts, the OPEC meeting next week may have a less significant positive impact.
Against this backdrop, CACIB prefers to avoid the USD for now and prefer relative value trades like longs in EUR/GBP and AUD/NZD
Soc Gen
Soc Gen FX Strategy Research argues that AUD/USD is in a long term bottoming phase and recommends a buy on dip strategy.
On the USD front, Soc Gen believes that DXY Index peaked in 1Q2017, and expects the dollar to fall gradually in the coming quarters which should support AUD/USD.
On the AUD front, Soc Gen expects the RBA to stay on hold through the rest of the year and to be able to tighten monetary policy in 1H18 if growth and inflation were to rise as it expects.
“The combination of RBA tightening and a secular USD decline argues for long AUD/USD on another major DIP. Drawing from the 2008 low through the 2016 low, the resulting trend line is around 0.7 currently. Beyond this are the 2015-16 lows at 0.68 – 0.69, which should hold in our view,” Soc Gen argues.
Thus, Soc Gen advices that a dip in AUD/USD towards 0.7 should provide a good opportunity to position for the subsequent long term appreciation trend.
TD
TD Research notes that the USD is set to post its biggest 1 week loss since November amid a rise in political uncertainity and the associated risks to economic growth and policy implications.
“Our model shows market pricing of the June-Fed hike has slipped to 70% from a peak of 89%. We don’t expect the recent political upheavel to derail a June Hike,” TD argues.
Strategy wise, TD thinks that for medium-term investors, the recent dip will likely provide opportunities to buy the greenback ahead of next month’s Fed meeting.
Still, in the near-term, TD notes that interest will be on Comey’s testimony next week that likely to provide the signal for markets.
“The USD could remain under pressure into the event but the impact of his testimony will be binary: new developments that work against Trump will soak the USD while no news is goods for the dollar,” TD argues.
BofAML
Bank of America Merrill Lynch Research now believes that the risk/reward around a June hike appear much more balanced.
In addition, BofAML expects that the Fed will provide more guidance over coming weeks about the near-term outlook for the Fed rate outlook.
“Our prior analysis has shown that the Fed has never hiked unless the market was pricing in at least 60% chance of such a move the day before the meeting and has most often hiked rates when the market was pricing in at least 80% or greater chance. This certainly has been the case over the past 3 fed rate hikes when the Fed actively worked to shift market pricing closer to this target,” BofAML adds.
In line with this view, BofAML now expects that the Fed will likely to come out over the next several weeks and guide the market in line with its thinking so as to avoid surprising the market if the decide to raise rate or to hold steady and shift market probabilities to be more in-line with their anticipated policy action.
Barclays
The focus of USD investors will be on next week’s FOMC minutes from the May 2-3 meeting.
In that regard, Barclays Research expects the minutes to show that most FOMC members viewed the slowdown in Q1 activity as transitory, and to downplay soft incoming data against continues improvement in labor market data.
“In addition, they should show that committee members viewed the weak February inflation data as driven by one-off factors. Regarding the outlook for the policy, the minutes will likely conclude that a further normalization remains appropriate.
That said, while we believe the minutes will reveal further discussion, we do not foresee the committee reaching consensus on how securities will roll off the balance sheet, among other items,” Barclays adds.
Barclays maintains its view that the FED will tighten in June.
Morgan Stanley
Morgan Stanley FX Strategy Research has turned more constructive on EUR and expects to see further EUR/USD upside to 1.2 over the coming months. MS outlines 4 reasons behind this call.
“First, currency unhedged inflows into EMU equities are gathering pace given relatively attractive valuations.
Second, market expectations on the ECB moving towards tapering could support further currency gains.
Third, investors hopes regarding Macron’s reform plans and the impact on EMU integration could help BTP-Bund spreads narrow further.
Lastly, better global growth is supporting the EMU’s export industry, which would translate into better Euro Area growth,” MS argues.
In line with this view, MS runs a limit order in it’s strategic portfolio to buy EUR/USD at 1.103 targetting 1.18
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