Institutional trade recommendations

Citi flags a strong bearish pattern on the USD Index (DXY) monthly chart and maintains a bullish bias on EUR/USD.
"CitiFX Technicals remind us of a Momentous Monthly Close On USD Index. The USD Index posted a Double top at trend highs after a low to high move of 8 years and 10 months- exactly as seen in the last USD cycle into 2001-2002. The minimum target on this break is now is the horizontal support and 200 month MA at 88.25- 86.75, potentially by December," Citi notes.
"We remain bullish EURUSD, but note that European equities have begun to underperform US equities, ECB commentary on FX could be coming up and we watch for the evidence of second virus waves. August 5 is the German Court deadline for more evidence on its QE ruling, but we think the Court is already satisfied," Citi adds.

Danske Research discusses EUR/USD outlook and maintains a bullish bias through Q3.
"Worries over virus developments outside the US have started to surface, so is now the time to get EUR negative again? We doubt that we will witness the large-scale closures seen during the spring and yesterday’s price action suggests that one probably needs to look for US rate rises and/or tech outperformance to get very negative on EUR/USD short term," Danske notes.
"In our base case that Fed delivers on its inflation hints with enhanced forward guidance in September, a reflation narrative is set to keep USD under pressure in Q3 and make a test of new year-highs in EUR/USD the dominating risk into the autumn. If that base case plays out, it would also spell good news for commodity currencies and in particularly the NOK enjoying a large beta to both commodities and European equities. A key downside risk to EUR/USD and commodity currencies is if Trump scraps the trade deal amid the current China software lash and/or election stress," Danske adds.

Credit Suisse maintains a bullish bias on EUR/CHF, expressing that via holding a long position targeting a move towards 1.10.
"We remain biased mildly higher and continue to look for another challenge on 1.0832/38. A sustained and closing break above here in due course would then reinforce thoughts of a broader change in trend direction to the upside and see resistance next at the 78.6% retracement of the May/July move lower at 1.0849/50 and eventually back up at the 1.0916 high of June," CS notes.
"Support is seen at 1.0732/30, just shy of 1.0720/12, where we would expect to see a more concerted effort to hold," CS adds.

MUFG Research maintains a bearish USD/JPY bias, expecting the pair to trade towards 103 through year-end.
"The yen correlation with equity markets has been very low while the correlation for most other G10 currencies has been considerably higher. The negative correlation between USD and equity markets has therefore resulted in sharper USD depreciation versus other G10 currencies than versus the yen. Eventually though catch-up is likely and that means continued downward pressure on USD/JPY reflecting broader conditions," MUFG notes.
"We have had a long-term view of gradual JPY appreciation. The aggressiveness of the COVID policy response has helped curtail JPY gains but the general global backdrop is consistent with JPY strength and eventual levels for USD/JPY below the 100 level are possible going forward," MUFG adds.

Citi discusses JPT technical outlook and prefers buying JPY crosses on dips than trading USD/JPY around current levels.
"USDJPY flashing more red than the Japanese flag. Our Asia trader also notes that the USD leg continues to drive the pair. USD/JPY on the other side, trades solidly across on the back of not solid equity but also some local interest.
"Expect USDJPY to stay around here 105/106.50 range for now. And now it seems extra difficult for USDJPY to go another leg lower quickly as it seems the market went short last week. Prefer to add USD/JPY on dip than touching USDJPY here," Citi notes.

Citi maintains a bullish bias on EUR/USD and adds a long exposure via a 2.5 month (19 October 2020) EUR/USD call spread.
"We remain bullish EURUSD as per our CitiFX Strategy H2 2020 Global Outlook and still see EUR upside vs USD and the majors. Three potential major drivers of EUR and EURUSD upside to us are: i) Low real rates supporting risk appetite ii) shifting investor appetite towards Europe amid a cyclical global recovery iii) risk premia around Biden winning the US election,' Citi notes.
"The confluence of these three factors should see a both persistent USD offer and EUR bid, leaving 1.25 as a conservative target ahead of the election," Citi adds.

Credit Suisse discusses USD/JPY outlook and sees limited scope for sharp moves below 105 under the current market conditions,.
"Last week we outlined our reasons for expecting a period of consolidation in G10 FX, having previously been mostly USD bearish for around 3 months, keeping our key near-term forecasts unchanged (EURUSD 1.18, USDJPY 105, AUDUSD 0.72).
We highlighted factors such as extreme short USD positioning, consensus greenback bearishness and a relative shift in new negative surprises on the Covid news front away from the US and towards other centres such as the EU and Australia. The debate around US fiscal stimulus also seems to be (very slowly) moving in the right direction towards an acceptable deal, with Senate majority leader McConnell saying he’s ready to support a package despite seeing “some problems with certain parts of it”, removing some USD-specific risk against other currencies in the process," CS notes.
"In the case of USDJPY, we argued that as long as US equity and credit markets remain well behaved, it is hard to see moves below 105 being extended," CS adds.

TD Research summarizes its bias on EUR/USD, USD/JPY, and GBP/USD. TD is short USD/JPY as its ToTW for this week targeting a move towards 104.
"The market moves this morning focus on a regional mix of drivers, reflecting the pullback in broader EM but some outperformance in G10," TD notes.
"For G10, GBP takes center stage in light of a less-dovish-than-expected BoE meeting this morning. The next critical level for GBPUSD is 1.32. USDJPY continues to hold 106, reaffirming our bias that the next move is lower. EURUSD continues to hold below 1.19 but remains a buy on dips in the months ahead,"TD adds.

Bank of America Global Research discusses the current market conditions and notes that market consensus may be too complacent ahead of major risks ahead such as US elections in November and the potential for a vaccine by year-end. To express this view, BofA is currently short USD/JPY and short GBP/CHF via options structure.
"Given the strong market consensus against the USD, the USD can keep weakening. As we noted, technicals, quant and flows, which to a large extent reflect how the market is trading now, are still against the USD. We would not try to catch a falling knife. Despite the sharp drop, the USD also remains overvalued compared to its long-term equilibrium, although by only about 3.7%, compared with 12% at the end of March," BofA notes.

Societe Generale Research keeps recommending short NZD/JPY and short GBP/CHF as its preferred trades for August.
"It’s striking that the volatility and the ‘normal’ seasonal moves are concentrated in EM. The very fragile three – TRY, ZAR, BRL, are down by an average of over 3% against the dollar and almost 4% against the euro, but NZD, AUD, CAD and GBP, the G10 currencies which find August tough, are doing OK so far. The yen and Swiss franc, by contrast, may be up against the dollar but not against any of the other G10 currencies," SocGen notes.
"Still, we’ll persist with GBP/CHF and NZD/JPY shorts, as well as longs in EUR/USD vol," SocGen adds.

MUFG Research flags a scope for USD rebound in the near-term, expressing that via recommending a short EUR/USD as it ToTW targeting a move towards 1.16.

MUFG Research adopts a cautious bias on GBP in the near-term.
"Over the last two weeks the GBP has been the best performing G10 currency. Unless there is a broader deterioration in overall investor risk sentiment, the GBP appears well placed to extend its advance in the near-term.
"If cable is able to break above the 1.3200 where the highs from earlier this year are located, it will open the door to a potential test of the December 2019 high at close to the 1.3500,"MUFG notes.
We would become more confident in further near-term GBP gains if EUR/GBP was able to break more decisively back below the 0.9000-level," MUFG adds.

Nomura Research discusses the JPY outlook and likes long positions in EUR/JPY, and AUD/JPY into year-end.
"Four key events are likely to have a major impact on market sentiment and could significantly affect yen-crosses into the next week: (1) expectations that the weak second wave of COVID-19 infection in the US; (2) progress on economic stimulus discussions in the US; (3) developments between the US and China in the run-up to the video talks scheduled for 15 August; and (4) the possibility of a US Democratic vice presidential candidate announcement," Nomura notes.
"In this regard, even if market sentiment improves after the above risk events, the upward pressure on USD/JPY may remain weak. By contrast, if the Fed becomes dovish, it is likely that EUR and AUD will appreciate further against USD and JPY after market sentiment improves. Although the weaker second wave in the US and the agreement on economic stimulus measures will contribute to USD/JPY appreciation towards year-end, yen-cross long positions, such as EUR/JPY and AUD/JPY long positions, are more promising for the time being, in our view," Nomura adds.

ING Research discusses EUR/USD outlook, and brings forward its 1.20 year-end target to 3Q20 and sees scope to 1.25, especially were global equity investors to execute on plans to rotate into European equities.
"Two themes have seen EUR/USD explode higher. First, the likelihood that sluggish US growth prompts ‘opportunistic reflation’ from the Fed. In practise this could see the Fed switch to average inflation targeting at the 16 Sep meeting and yield curve control. Low rates, while inflation (hopefully) rises would see US real interest rates move deeper into negative, devaluing the USD," ING notes.
"The second theme is the re-rating of the European project after progress on the EU Recovery Fund. Investors have yet to rotate into European equities, but EUR/$ could trade 1.25 if they do. We have a conviction that EUR/$ stays bid into the 3 November election," ING adds.

NAB Research discusses AUD/USD technical outlook and sees a scope for short-term correction towards 0.7032/82 in the next 1-2 weeks.
"Friday produced a new 2020 high at 0.7243 before closing at 0.7157 and completing a bearish ST (daily) reversal pattern. Such a trigger implies that the uptrend has reached a point of ST exhaustion," NAB notes.
"Weekly and monthly momentum indicators continue to confirm a strong and sustainable MT/LT uptrend bias. Daily momentum indicators however have produced bearish failures at the recent highs and confirmed ST correction risk.
Risk is high for a ST correction in the coming 1-2 weeks and retest of MT support at 0.7032/82," NAB adds.

Credit Suisse discusses EUR/USD technical outlook and flags a scope for a lengthier consolidation phase in the near-term.
"Although our medium-term outlook stays bullish, we continue to look for a lengthier consolidation phase before the core uptrend resumes, and we may be potentially even seeing the formation of a “double top”.
Resistance is seen at 1.1818 initially, with a break above 1.1851 needed to clear the way for a retest of 1.1916/26. Above here can reassert the uptrend with resistance seen next at 1.1997 then what should be tougher initial resistance at 1.2145/55," CS notes.
"Near-term support moves to 1.1755, then the 13-day average and price support at 1.1738/21 which we look to try and hold to define the lower end of a high-level range. Below 1.1699/97 though would see a “double top” established to warn of a more concerted setback with support then seen next at 1.1630/22 – the 38.2% retracement of the rally from late June," CS adds.

UOB Research discusses AUD/USD technical outlook and adopts a neutral bias in the near-term.
"AUD has moved into a consolidation phase and is likely to trade between 0.7050 and 0.7250. In our latest narrative for AUD from last Thursday (06 Aug, spot at 0.7105), we held the view that “the outlook for AUD is mildly positive and that the major resistance at 0.7300 is likely out of reach”,' UOB notes.
"AUD subsequently eked out a fresh high of 0.7242 on Friday before dropping sharply. The mild upward pressure has more or less dissipated and from here, AUD is deemed to have moved into a consolidation phase. For the next couple of weeks, AUD is expected to trade between 0.7050 and 0.7250," UOB adds.

Hello Alex,

Can I ask you if all this information gathering has helped you so far, objectively, to better asses your trades, current trading conditions, or better said, brought any real value to your account ? Does not matter if real or demo, just if you consider that it has helped you trade better.

Thanks!

Hi Razvan,
I think it's very helpful. But to be honest, I did some bad trades based on my own analysis. In retrospect, I should have traded some of these recommendations.

Citi discusses NZD outlook in light of this week's RBNZ policy meeting.
"While rates were left unchanged as expected, the RBNZ increased its Large Scale Asset Purchase program to as much as NZD100bn from NZD60bn and extended it until June 2022. This was dovish for two reasons (1) it was not wholly expected today and (2) the NZD40bn increase is sizeable. Additional guidance made it clear that the policymakers were aiming to actively push bond yields lower and address recent NZD appreciation," C ti notes.
"NZDUSD has dragged AUDUSD lower (which was not helped by poor consumer sentiment data overnight). CitiFX Strategy had expected Further downside for NZD, eyeing the mid-July low around 0.65," Citi adds.