BNP Paribas’ Top FX Trades & Market Drivers For 2016


2016 is around the corner, and we already asked the question: will the dollar rise or turn down? 

After providing the ideas from BofA, here are interesting ideas and targets from BNP Paribas. And despite the recent euro-rally, EUR/USD parity is still on the radar:

Here is their view, courtesy of eFXnews:

We expect policy divergence to be a key driver of the FX market in 2016, just as it was in 2014 and 2015.

In 2016, we expect policy divergence mainly to be driven by policy tightening in the US and the UK, rather than by easing in other countries which has been the case in recent years.

With the Fed set to start its rate-hike cycle from December and the Bank of England (BoE) by May 2016, on our forecasts, we are broadly bullish on the USD and the GBP, although central bank sensitivity to FX appreciation will limit the rise in both currencies.

We expect commodity bloc currencies to remain highly vulnerable as commodity prices remain weak and collapsing rate differentials undercut carry trades.

In EM, we favour positioning for broad USD appreciation via USDZAR call spreads and also see scope for increased correlation between USDCNH and EURUSD. In contrast, we recommend positioning for MXN recovery versus G10 commodity exporter currencies,” BNPP argues.

Top 10 FX trades:

1. Long USDJPY – target 134

2. Short EURUSD – target parity

3. Short EURSEK – target 8.60

4. Basket long GBP and USD and short AUD, CAD and NOK – target 5% gain

5. Long GBPCHF with referendum protection—target 1.70

6. Buy AUDCAD 10d puts as portfolio hedge

7. Buy 1y 10d EURAUD calls funded by selling 1y 10d AUDJPY puts

8. Long MXN and short CAD and AUD – basket target +6%

9. Buy 1y dual digital EURUSD 1.02 put, USDCNH 6.65 call

10. Long USDZAR via call spread,” BNPP advises.

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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