EUR/USD lost a lot of ground so far in 2014, and its fate is not set to be different according to Credit Suisse. Also gold will probably continue south according to the updated 2015 forecasts.
Here are top 10 trades for 2015:
Here is their view, courtesy of eFXnews:
Credit Suisse is out with its top ten trades for 2015. The following is the list of these top trades along with the rationale, and risks for 2 of these trade recommendations (selling EUR/USD and selling Gold).
1. Sell EURUSD: Rationale: We expect further monetary policy divergence next year, with the ECB moving toward full-blown QE while the Fed commences the first tightening cycle in ten years at the June FOMC. The Trade: Sell EURUSD at 1.2475 with a target of 1.1500. Primary Risk: Lack of anticipated policy divergence.
2- Buy TOPIX Currency: The Trade: Buy the TOPIX at 1377, targeting 1520, currency hedged. Primary Risk: Abe popularity declines to levels that force the return of pre-Abe policies.
3- Buy FX Implied Volatility. The Trade: Buy 1y->1y EURUSD FVA. Entry 8%, targeting 11%. Primary Risk: A generalized decline in the EURUSD vol surface.
4. Sell Front-End USD Rates. The Trade: Buy risk/reversal in Dec-15 Eurodollars (long 98.75 puts versus 99.625 calls). Entry 0bp net premium, targeting 15bp. .
5. EUR 10s30s Flatteners Rationale: The Trade: Establish 10s30s EUR flattener at 74bp, targeting 60bp. Primary Risk: Large-scale ECB buying in the 10y area of the curve..
6. Sell Gold. Rationale: Gold remains very expensive relative to historical norms, with carrying costs becoming more penal as US interest rates begin to rise. Our technical analysts target a fall to $950 by end-2015. The Trade: Sell XAUUSD at $1167, targeting $950. Primary Risk: Delayed Fed tightening.
7. Overweight US CMBS Credit: The Trade: Overweight CMBS, targeting 15bp-20bp of tightening.
8. Buy US BB HY versus US CCC HY. The Trade: Overweight BB HY, at a spread of 311bp, and underweight CCC HY, at a spread of 857bp, targeting a spread widening between these categories of 125bp. Primary Risk: Delayed Fed tightening.
9. Buy Front-End EUR Peripherals. The Trade: Buy 2y Spanish bonds. Entry yield 0.47%, target 0.15% yield.
10. Buy Indian Bonds Against Paying Low Yielders. The Trade: Buy India 2019 bonds against paying 4y-5y Israel IRS.
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