Danske Bank: Majors EUR/USD: SHORT AT 1.2940 FOR 1.2788; STOP AT 1.3011 USD/JPY: LONG AT 106.85 FOR REVISED 108.45; REVISED STOP AT 106.60 GBP/USD: REVISE SELL AT 1.6260 FOR INITIAL 1.6052; STOP AT 1.6345 USD/CHF: BUY AT .9290 FOR .9437; STOP AT .9237 AUD/USD: LOOK TO SELL USD/CAD: BUY AT 1.1010 FOR 1.1188; STOP AT 1.0929
Crosses EUR/JPY: BUY AT 138.55 FOR 140.09; STOP AT 138.20 EUR/GBP: POSSIBLY SELL EUR/CHF: LONG AT 1.2085 FOR 1.2155; STOP AT 1.2065 EUR/CAD: POSSIBLY BUY GBP/JPY: LONG AT 171.00 FOR 175.35, STOP AT 173.60 NZD/USD: SHORT AT .8400 FOR REVISED .8052; STOP AT .8230
Lots of questions this morning following the ‘shockingly weak’ August data set for China… Ting Lu has cut 3Q and 4Q growth forecasts to 7.2% and 7.3% yoy from 7.4% and 7.4% and states the chances of a system wide RRR cut are rising rapidly, but his base case is for further ’targetted easing’ (mortgage rates and lending in particular). For China FX, immediate thoughts are that the PBoC may keep fixings stable, but we could see some unwinds in short USDCNH positions held by offshore investors. A tactical short CNH, long CNY trade may therefore make sense with the short leg helped this week by concerns into the FOMC.
Regarding China’s weak activity data release over the weekend, Ting Lu, BofAML’s Chief China Economist, was expecting a moderation in data but the scale of the moderation was also to his surprise. He attributes the surprisingly bad data to the property downturn and the ongoing anti-corruption campaign mainly. However, Ting thinks that the shockingly bad data will prompt more stimulus measures from Beijing. We maintain our China GDP forecast 7.2% for 2014 and expect Chinese government to lower their 2015 GDP target from 7.5% to 7.0%. With more stimulus measures taking place in mind, weak china data could be good opportunity to sell USDCNH on rally for medium term CNH higher view. Our Asia FX team also likes to short AUDCNH, target 5.40.
Following the ‘shockingly weak’ August data for China released over the weekend, BofAML trading want highlight that they prefer a TACTICAL long USDCNH position against trading in CNY because of the potential for the PBoC to keep the fixings stable. Historically, the PBoC has kept the fixing levels stable in times of distress because the currency is the image of China and wish to discourage market speculation. That being said, Leo Cheng, Head of China Trading, cautions that with strong trade data having only just passed, it is best not to jump to conclusions early on this weaker print but remain tactical ahead of more important events throughout October where we expect more medium term strength to return along with the potential for further stimulus as highlighted by #1 BofAML economist Ting Lu.
Heads up on AUDUSD… 61.8 fib and target just below 0.8982
Traders pointing out US 7-year Note yield has broken above 2.277% — downtrend from Apr 2010.
A couple from Predicted MArkets
Since February 2009 there have been 25 times when – as last week – USD/JPY has posted a net weekly gain of 2% or more. Of the 12 that went on to show a net gain of at least 0.8% at some stage the following week, 11 went on to close the week above there. The equivalent level this week is 108.10
Last week was the 9th week in a row that GBP/USD had broken the previous week’s low. This sequence has extended to 10 weeks once since January 1985, the exception coming on 1st March 2013 (when the sequence of broken weekly lows lasted for 12 weeks)
OECD cuts 2014/15 growth forecasts for major economies. Biggest downgrade was for Italy. 2014 growth forecast -0.4 % vs +0.5 % previously. Main worry is the Eurozone and very low inflation, ECB must provide even more vigorous monetary stimulus, according to OECD.
We are seeing consistent demand for USDCNH as we continue to see risk reduction in this pair. It’s not had a move like this since May (citi)
NZDUSD Bearish Rising Wedge Mast Projection to 7700
For those technically minded, AUD/CHF also worth a look, esp on l/t charts
when you say long?
well I didn’t like to sayBut yes, very solid support 8350/60
But if it breaks below 8315, then we’ll probably see another increase in bearish momentum