A return to fundamentals is likely for the coming week following last week’s risk events: However, this does not necessarily mean a reduction in volatility. Indeed, we expect the recent pick-up in volatility to be maintained, keeping the high-beta currencies under pressure and USD supported. Furthermore, a continued decline of commodity price indices is set to keep commodity-related currencies vulnerable. We have lowered our recommended selling level for AUDUSD. The Japanese policy debate is also set to increase as the government looks set to press ahead with the second stage of the sales tax hike next year, with the pressure on the BoJ to provide further stimulus. However, we await a setback before considering renewed USDJPY longs.
Currency Pos Entry Target Stop
EURUSD Short 1.2900 1.2500 1.2950
USDJPY Buy 108.20 110.50 107.80
GBPUSD Sell 1.6450 1.5860 1.6550
USDCHF Long 0.9380 0.9600 0.9300
USDCAD Long 1.0950 1.1300 1.0850
AUDUSD Sell 0.9000 0.8600 0.9100