EUR/USD made a last-minute drop to end the first week of Q2 at critical support. What’s next?
Here is their view, courtesy of eFXnews:
EUR/USD: Make Or Break At 1.0590 – JP Morgan
JP Morgan FX Technical Strategy Research notes that EUR/USD key-reversal down the market has extended its losses slightly but lost down-momentum as it approached the first crucial support cluster at 1.0590.
“The latter and another support cluster at 1.0494/74 (pivot/int. 76.4 % on higher scale) are the classical countertrend decline targets and potential launch pads for a broader recovery,” JPM argues.
If this support level holds, JPM expects a minimum bounce to 1.0840.
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EUR: Downside Risk Intact Into French Elections – Credit Agricole
Credit Agricole CIB Research maintains a cautious view on EUR ahead of the first round of the French presidential election.
“In an environment of strongly capped monetary policy expectations, ongoing uncertainty as when it comes to French politics and speculative EUR positioning back to balanced territory, we expect currency downside to remain subject to downside risks,” CAIB argues.
In terms of data, CACIB doesn’t expect next week’s April ZEW and February production data to have any big currency impact especially ahead of the upcoming Easter holiday.
EUR: 2 Reasons Why Downside Should Be ‘Very Limited’ From Here – BTMU
BTMU FX Strategy Research argues that EUR downside should be very limited on the back of the following 2 factors:
First, ahead of the French elections, BTMU notes that the opinion polls in France indicate Marine Le Pen is making no in-roads into the 2nd round lead of Emmanuelle Macron.
Second, BTMU notes that the ECB data on portfolio flow in the euro-zone have recently revealed a shift in long-term portfolio investments that point to upside risks for the euro if sustained.
“These factors suggest the downside for the euro is very limited from here with better conditions falling into place for a period of EUR appreciation,” BTMU argues.
Long USD, Buy A EUR Dip, Sell A GBP Rally – BofAML
Bank of America Merrill FX Strategy Research outlines its tactical view on the USD, EUR, and GBP in the near-term.
In terms of the macro outlook, BofAML notes that the Fed is taking advantage of the good times to keep normalizing monetary policy, while the ECB is considering its way out from unconventional policies, but the exit likely will be very slow and could take the whole of 2018.
How to position in G10 FX. BofAML recommends the following strategy:
“Long USD: positioning is neutral, if not short, and US tax reform and a hawkish Fed could surprise.
Buy a EUR dip ahead of French elections: we do expect headline risks from the French elections, but we would buy a dip, particularly against CHF and JPY.
Sell a GBP rally: we expect the slow start of the Brexit negotiations to weigh on sterling, also affecting the data and keeping the BoE on hold,” BofAML advises.
EUR/USD is trading circa 1.0615, GBP/USD is trading circa 1.2394 , and USD/JPY is trading circa 110.70 as of writing.
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