Institutional trade recommendations

Credit Suisse discusses USD/JPY technical outlook and flags a short-term top pattern in the making.
"We think the pressure is building steadily for a completion of an important top and more material turn lower, with support then seen next and initially at 105.20/14 – the 61.8% retracement of the March rally. Whilst this may hold at first, we note the “measured top objective” would be seen set lower at 102.34," CS ads.
"Resistance is seen at 106.65/70 initially, with the immediate risk seen lower whilst below 106.92. Above can reassert the sideways range again," CS adds.

Credit Suisse discusses EUR/USD technical outlook and maintains a bullish bias in the near-term.
"EURUSD has started the week strongly, surging sharply higher again following its weekly close above 1.1495 and the completion of a medium-term base and with the USD expected to weaken materially further after the completion of a major top we maintain our core bullish outlook.
Tougher resistance seen starting at the potential downtrend from the 2007 peak at 1.1798, then the September 2018 high and 61.8% retracement of the fall from 2018 at 1.1815/22. We look for this to cap at first for a pullback/consolidation. Big picture, we continue to look for 1.1997 and eventually a challenge on its early 2018 “neckline” at 1.2155, which we expect to prove a tougher barrier," CS notes.
"Support moves to 1.1659 initially, then 1.1637/22, which we look to hold to keep the immediate risk higher. Only back below 1.1581 though would be seen marking near-term exhaustion," CS adds.

Citi discusses the scope for an extended USD sell-off in light of technicals, positioning, and month-end flows.
Technicals: DXY broke a key support on Monday and continues below support, explaining bullish breaks for EUR, JPY, GBP and select EM currencies.
Positioning: CitiFX Flows & Positioning shared that USD positioning moved into short territory this week, driven by selling by both real money and leveraged investors. We note that much of this net USD selling was likely against EM in aggregate," Citi notes.
Rebalancing: July 2020 Estimate. The model also suggest a mild rotation from equities to bonds with a very weak signal," Citi adds.

Bank Of America looking for GBP to decline through to the end of this year on:

1. "stuck in the mud" Brexit negotiations
2. softer monetary policy
3. seasonal underperformance, say that GBP trade-weighted index has on average underperformed in 4 out of 5 months August to December since 2004

BoA say they do not accept that GBP is significantly undervalued. Look for further weakness mostly in:

1. GBP/CHF
2. EUR/GBP

Forecasts:

1. EUR/GBP at 0.92 by year-end
2. GBP/USD at 1.17

"While a no-deal would have the most immediate macro and FX impact (1.10 in GBP/USD; 0.95+ in EUR/GBP), a bare-bones trade deal would mean a bleed lower in GBP over the course of 2021"

Credit Suisse discusses USD/CAD technical outlook and maintains a tactical bearish bias in the near-term.
"The downmove in USDCAD has stalled ahead of the pivotal 2020 low and retracement support at 1.3331/15 as expected, switching into a mild consolidation phase (in line with daily RSI momentum in oversold territory).
With a bear ‘wedge’ continuation pattern still in place and daily MACD momentum also still moving lower, we stay biased to the downside and look for a close below here in due course though, with support seen thereafter at 1.3272, ahead of 1.3233. Big picture, the ‘measured wedge objective’ is seen lower at 1.3206, just shy of a more important support area at 1.3202/3191,"CS notes.
"Resistance is seen initially at 1.3404, ahead of 1.3435/45, which now ideally caps to keep the immediate downside bias intact. Above here though would see resistance next at 1.3486/91 and 1.3519," CS adds.

CIBC discusses EUR/CHF outlook and targets the cross around 1.09 by year-end.
"Over the last four weeks there has been an acceleration in the accumulation of sight deposits, with the rebound being a function of EUR CHF testing the 100day MAV of around 1.0620 in early July. We continue to expect the SNB to maintain a vigilant stance regarding the currency, through rapid expansion in the central bank’s balance sheet, despite the scale of the balance sheet remaining a potential concern," CIBC notes.
"We continue to view the SNB as intent upon putting a floor under EUR CHF, at around 1.06, in order to limit disinflationary tendencies and sustain exporter competitiveness. In terms of inflation, Swiss HICP dipped to a four year low of -1.3% in June, while business sentiment has only rebounded modestly from all-time lows. With the Swiss economy closely aligned with Germany and the eurozone as a whole, and the German economy expected to get a boost from the aggressive fiscal expansion, combined with the boost to EUR sentiment following the agreement of the EU 27 on the rescue fund, EUR CHF remains biased towards a return to 1.09 into year-end," CIBC adds.

Citi maintain a bullish bias on AUD in general and on AUD/NZD in particular.
"As for the road ahead, CitiFX Strategy remains bullish AUDNZD based on: (i) diverging monetary policy; (ii) sizeable relative improvement in Australia’s current account; (iii) positive technical setup. More broadly we also maintain our broad-based structural bullish view on AUD into 2H 2020,"Citi adds.

Bank of America Global Research discusses EUR/USD technical outlook and highlights a bullish setup on a weekly close above 1.1760.
"EUR/$: 12 year old downtrend line narrowly broken. Ending the third week of July, euro closed at 1.1656 which is above its weekly closing resistance line at 1.1644 (a small bullish breakout). To further confirm this break, look for a second weekly close above 1.1644 and/or a weekly close above 1.1760 which is more than 1% above this trend line," BofA notes.
If this occurs then it supports the bullish evidence building in and to buy a forthcoming Aug/Sept dip. In the aforementioned report we also highlight a trend line at 1.1820. Note that a 38.2% retracement of the decline beginning in 2009 is at 1.2550," BofA adds.

Credit Suisse discuses USD/JPY technical outlook and maintains a tactical bearish bias.
"USDJPY remains under pressure after the completion of a top below the lows from May and June as well as “neckline” support at 106.15/105.98 to suggest a more material turn lower is underway. Indeed, next support at 105.20/12 has now been removed as expected – the 61.8% retracement of the March rally – and we look for a direct resumption of the downtrend support seen next at 104.49/39 ahead of 103.98/94 and then 103.43 – the 78.6% retracement of the rally from March. Whilst we would look for this to hold at first, a break in due course should see support next at 103.09, with the “measured top objective” seen set lower at 102.34," CS notes.
"Resistance is seen at 105.38 initially, with 105.70 ideally capping to keep the immediate risk lower. Above can see a rebound to 106.08, potentially 106.21, but with this then ideally capping,"CS adds.

Danske Research highlights a scope for EUR/USD to extend its recent gains towards breaking the 1.20 level.
Broad-based USD weakness has continued to dominate FX markets during the month of July (Chart 1). Earlier this month, we notably upped our 1-3M EUR/USD targets to 1.16. This target has now firmly been reached with the cross briefly rising above 1.18 and near-term direction looks intact after the Fed meeting yesterday," Danske notes.
"As we stressed on 6 July, it is such US (and hence global) inflation trends that will be key in driving EUR/USD. A Fed that looks adamant to reflate thus leaves a heightened risk of a break of 1.20 over the autumn, and we stress that there are notable upside risks to our 1-3M forecasts of 1.16,"Danske adds.

Bank of America Global Research discusses USD/JPY technical outlook and flags a scope for a material move lower on a weekly close below 105.39/104.47.
"On a daily candle chart, yes the break of 106 mattered. However the two weekly closing lows of 105.39 are what matter more for the bigger picture. This was the same weekly closing value in March 2020 and in August 2019. In March 2018 it closed at 104.74. So there is still some support nearby and is probably why $/JPY hasn't sold off more from a technical view on the break of 106," BofA notes.
"A descending triangle pattern (unconfirmed until a break happens) implies a break lower could follow with 100.72 and 94.85 possible," BofA adds.

Societe Generale Research likes short GBP/CHF and short NZD/JPY as best trades for August. SocGen is short NZD/JPY targeting a move towards 64.

"Short GBP/CHF for August. Our belief that we are set up for an illiquid, volatile August may yet backfire: No rules are set in stone in FX, but short NZD/JPY was our top directional pick for the month, and we initiated it formally yesterday on the trade tracking system. It's in decent shape. One trade which ticks the boxes for August is short GBP/CHF and Sterling has actually had a reasonably good July," SocGen notes.

"We prefer NZD/JPY shorts to AUD/JPY because they've done better on average over the last 20 years and because Australia's current account and budget balances cushion the economy. Australia may be seeing virus outbreaks, which require renewed closing down of bits of the economy, but the fiscal position means they can offset that, for longer than in other countries,' SocGen adds.

Bank of America Global Research maintains a bearish GBP bias through year-end, and likes to express that via short GBP/CHF (1.1830/1.14 GBP/CHF put spread in 1x2).
"We remain bearish GBP. 3Q/4Q a perfect storm. Seasonality to work against GBP into year-end. Weaker GBP against backdrop of high policy uncertainty. We make the case for lower GBP/CHF," BofA notes.

Citi is looking to sell USD rallies and buy GBP on dips over the coming weeks.
"We remain bearish USD and in particular would fade any USD rallies...August tends to see modest USD upside and month-end rebalancing signals were for USD selling. We note investor questions about the long-term role of USD are rising," Citi notes.
"We see more GBP upside and would add on any dip on a dovish BoE outcome on Thursday, where we don’t expect the BoE to put negative rates firmly on the table," Citi adds.

Credit Suisse discusses USD/CAD technical outlook and stays bearish in the medium-term but will turn neutral in the near-term on a daily close above 1.3445.
"USDCAD has seen a strong reversal higher from the pivotal 2020 low and retracement support at 1.3331/15, although not managing to close above the key 1.3445 high and thus avoiding a minor base and suggesting only an extension of the current consolidation range.
With a bear ‘wedge’ continuation pattern still in place, we stay biased to the downside over the medium term and look for a close below here in due course, with support seen thereafter at 1.3272, ahead of 1.3233. Big picture, the ‘measured wedge objective’ is seen lower at 1.3206, just shy of a more important support area at 1.3202/3191," CS notes.
"Resistance is seen initially at 1.3445/60, which now ideally caps to keep the immediate downside bias intact. Above here though would see the completion of a small base and see resistance next at 1.3486/91 and 1.3524. We would expect the market to find a cap here and see a move back lower if reached," CS adds.

CIBC Research adopts a bullish bias on USD/CAD, targeting the cross at 1.37 by end of Q3 and 1.38 by year-end.
"The loonie received a lift alongside other majors versus the greenback in the past month, helped by firmer crude prices . But the CAD has underperformed others like the euro, and the rally is now running on empty," CIBC notes.
"The strength in CAD appears set to reverse in short order as relatively weak fundamentals are revealed, and the global economic recovery stalls, giving a safe haven bid to the USD. We see USDCAD ending the third quarter at 1.37," CIBC adds.

Societe Generale Research flags NZD, AUD, CAD, and GBP as the most vulnerable G10 currencies in August.
'In terms of trading positions, illiquidity and seasonals, the easiest conclusion is that FX volatility is likely to be higher this month. The second easiest conclusion is that the dollar is likely to do well against the high-beta EM and DM currencies. Our EM strategists highlight the risk to BRL and ZAR, in terms of both elevated volatility and weaker spot. We have identified NZD, AUD, CAD and GBP as the vulnerable G10 currencies," SocGen notes.
This morning's G10 losers are CHF and NOK, but the trades we picked out for this month were short NZD/JPY and GBP/CHF. With 10yr TIPS yields at -1%, the yen should still shine," SocGen adds.," SocGen adds.

Hi Alex,
I was going to respond earlier but it slipped my mind. Thanks for these valuable insights from the big players. Always nice to look at it.
Cheers
Leon

Hi Leon,
Thank you for your kind words. I am happy you find this thread helpful.

Credit Suisse discusses EUR/USD technical outlook and flags a scope for consolidation phase in the near-term.
Even though EURUSD managed to move briefly above 1.1900 on Friday strength was not sustained and the subsequent sharp retreat has seen the market close the week back below the long - term downtrend from the 2008 peak at 1.1797. This suggests the rally has become exhausted near term and although our core outlook stays bullish ( we now look for a consolidation/correction to emerge," CS notes.
"Below 1.1734/31 should see weakness extend back to the 13 -day average at 1.1655, potentially the 38.2% retracement at 1.1627/22, but with this latter support then ideally holding.
Post a pullback we would look for the uptrend to resume with resistance seen at 1.1797 initially and with 1.852/63 needing to be cleared for a direct move back to 1.1904/09. Above here in due course should see strength extend to our first major flagged resistance at 1.2145/55," CS adds.