Societe Generale Research maintains a bearish bias on USD/CHF and likes short exposure better than long EUR/USD in the near-term.
"The two-day EU Council that aspires to reach agreement on the recovery Fund will hang over the euro but may fail to deliver much hard news...There is a press conference scheduled at the end of day one, but that is unlikely to happen before late afternoon and there's a strong chance that a second meeting is required to resolve issues later this month. As is the way with many European deals, agreement will take both time and compromise, but is likely in the end," SocGen notes.
"There is some progress priced into the EUR/USD rate. A really good deal (little compromise at all and a blueprint for future fiscal co-operation) could see EUR/USD at 1.20 in a few months, whereas deadlock could drag EUR/USD back in to a lower range, perhaps with a low at 1.10. Compromise and more talks leave usd worried about August volatility and the big net euro long on the CFTC data. we'd rather be short USD/CHF than long EUR/USD here," SocGen adds.
Credit Agricole CIB Research discusses EUR/CHF outlook and maintains a bullish bias, expressing that via holding a long position targeting a move towards 1.15.
Credit Suisse discusses EUR/USD technical outlook and maintains a bullish bias in the near-term.
"We maintain our bullish bias for a challenge on pivotal resistance from the high for the year at 1.1495. Whilst we expect this latter level to remain a formidable barrier, a break higher at any stage would be seen completing a significant medium-term base to mark a more sustained trend higher with resistance next at 1.1571, then the 50% retracement of the fall from 2018 at 1.1596, which we would expect to cap at first for a pullback,"CS notes.
"Big picture though, we suspect we could eventually see the market test its early 2018 point-of-breakdown at 1.2155.
Support moves to 1.1412 initially, then 1.1378/70, which we look to try and now hold. A break can see a deeper setback to the uptrend and price support at 1.1337," CS adds.
Societe Generale Research discusses its bias on EUR/USD through August, and likes long AUD/CAD, and AUD/NZD over the coming weeks.
"The consensus view today will be ‘take profits in euro longs'. We wouldn't be surprised if EUR/USD risk reversals, already drifting lower, fall further even if the spot rate just settles into a 1.14-1.15 range for now. But consolidation through August would build a platform for a more meaningful rally in the last four months of the year, and beyond," SocGen notes.
Danske Research discusses USD/CAD outlook and targets the pair at 1.34 in 1 and 3 months.
"USD/CAD has generally mirrored EUR/USD moves closely over the recent months, reflecting how the global environment is in the driver’s seat for the cross.
TD Research discusses the Google mobility trends, and likes buying on EUR/USD on dips over the coming weeks, and long CAD/NOK as its ToTW for this week.
Citi maintains a bullish bias on EUR/USD and flags a case for further upside over the coming weeks.
"How we think about EUR Recovery Fund and What's Next. The EU Summit outcome is a significant success by the EU’s own standards, but we maintain the view that it is not a game changer for the Eurozone’s growth or institutional prospects," Citi notes.
"We remain bullish EUR and EURUSD but we think the case for further upside is primarily driven by low real yields in the US and investors’ desire to reduce underweights in European assets, including as global investors diversify away from the US," Citi adds.
Credit Suisse discusses USD/JPY technical outlook and adopts a neutral bias in the near-term.
"USD/JPY has seen a fresh and what looks more decisive rejection of a cluster of resistances centred on 107.42, including its 55-day average and the sharp move lower sees the market retesting price support from the lows of the past two weeks at 106.65. Beneath here can clear the way for a retest of what we view as more important support from the lows from May and June and “neckline” support at 106.14/105.98," CS notes.
"Resistance is seen at 107.12 initially, then well layered from 107.38/42 through to 107.53/60, with the risk seen staying lower on balance whilst below here," CS adds.
UOB Research discusses the technical outlook for EUR/USD and flags a triple moving average pattern on the weekly chart.
"On top of the bullish crossover in moving averages and strong ADX, EUR/USD is also approaching a 6-year declining trend-line resistance at 1.1635. A break of such long-term trend-line could potentially lead to a rapid upward acceleration in EUR/USD. Aside from moving averages and ADX, other technical indicators are also suggesting a higher EUR/USD from here.
Looking forward, if EUR/USD breaks above 1.1635, the next resistance levels are at 1.1750, 1.1830 and 1.1950. Support is at 1.1350 and the level where the three moving averages are clustered together now (around 1.1150) is acting as a key and crucial support," UOB adds.
Credit Suisse discusses USD/CAD technical outlook and maintains a bearish bias in the near-term.
"USDCAD extends its downmove in early trading today, breaking below the price support and pivotal 78.6% retracement of the June correction higher at 1.3402/3398, in line with the bear ‘wedge’ continuation pattern that is in place. With daily MACD momentum also crossing lower, we stay biased lower and a close below the aforementioned 1.3402/3398 would see next support at the more important 2020 low and retracement support at 1.3331/17, where we would expect to see fresh buyers at first," CS notes.
"Big picture, the ‘measured wedge objective’ is seen much lower at 1.3206, just shy of a more important support area at 1.3202/3191. Resistance is seen initially at 1.3427, then 1.3486/91, ahead of the 200-day average at 1.3515, which ideally now caps. Above here could see a move back to 1.3539," CS adds.
TD Research discusses the EUR outlook and sees a scope for a 1.20 test over the coming weeks. TD prefers buying EUR/GBP and buying EUR/USD on dips.
"What's next? While trying to fade some of the excesses priced into the markets the past few months, we have steadily revised our USD forecasts lower. We see plenty of EUR runway in the quarters ahead. Our LFFV composite (low-frequency fair value), pointing to an 8% discount. Barring FEER, the other three models price a 10-15% discount. Given the EUR half-life of this composite measure runs about ten months, that puts EURUSD in a 1.20-1.25 range next year. The test of 1.20 may happen sooner, but we stress that lots of good news has been priced and we still prefer to buy on dips than chase things here," TD notes.
"A clean EUR trade is to buy EURGBP, which trades with little bias on the mobility trends. It's unlikely that European assets will continue their meteoric rise without interruption, leaving us to focus on these relative value distortions. The next big USD move is lower, but that will take months and quarters rather than days," TD adds.
Bank of America Global Research discusses EUR/USD outlook and now targets the pair at 1.12 in Q3 and 1.08 by year-end.
"As the market has moved in a different direction from our forecasts, we update our forecasts, marking to market. We now expect EURUSD at 1.12 in Q3 from 1.08 before and 1.08 in Q4 from 1.05 before. We keep our 2021 EURUSD forecast at 1.15. We therefore retain a bearish EURUSD bias, to a large extent because of our positive USD view, which in turn is based on a bearish outlook for the global economy," BofA adds.
TD Research discusses the positioning across G10 and flags some of its current FX trades.
"Positioning is most crowded in CHF, SEK, EUR, and gold. They are all sitting above levels (1.0) that our backtests argue to fade on mean-reversion. The market has dialed back long exposure in the JPY the past month and has universally seemed to add more short USD exposure. The one outlier is CAD, where PIT is close to neutral (zero). Our trades are (frustratingly) aiming to poke at these mispricing gaps," TD notes.
"We're long CADNOK (TOTW) but remain short SEKJPY, CHFJPY, AUD, and NZD versus CAD and USD. It's now or never for some of these mean reversion trades over the next 4-6 weeks," TD adds.
Societe Generale Research revisit some of the August seasonal tradee which had performed over the past 20 years.
"We outlined August trade ideas in time to find summer cover and your intuition is right: August tends to be good for the yen, Swiss franc, and gold, and for volatility. The best G10FX trade in August over the last 20 years, is short NZD/JPY. Which is interesting as USD/JPY tests 106 again (it's failed to break this level twice already in the last three months)," SocGen notes.
"Given what US real yields are doing (collapsing, 30yrs at new lows, 10s heading that way) and how gold is reacting to that (going mental) the yen's timidity is striking. We haven't given up on the yen however: A safe haven currency that remains in a narrow range while equities roar higher is doing a great job as long as it does rally when stocks falter. If we do break, two thins follow: one, is that August may well see the yen push stronger in traditional fashion," SocGen adds.
Analysts at MUFG recommend selling USD/JPY at spot with a target of 1036.80 and a stop at 107.60.
"The USD/JPY rate has fallen sharply today and we see scope for that extending over the coming weeks," they wrote on Friday. "The FOMC meeting next week is also likely to be dovish, and we see scope for downside risks for the dollar post-FOMC next. Finally, seasonal patterns for USD/JPY show the coming two months as strongly biased to the downside."
Bank of America Global Research discusses USD/JPY outlook in light of its expectations for Japan's basic balance of payments to recover into the fall season..
"Forecasts: USD/JPY to grind lower. We expect JPY to rise once the equity rally loses momentum. We revise our September forecast from 102 to 104 but we maintain our range forecasts (100-113) and year-end target (103). We expect USD/JPY to test 100 in 3Q20-4Q20," BofA adds.
