Trading Plan for Sep 19

The disappointing TLTRO didn’t trigger a sizeable decline in EUR/USD. The European banks applied only for 82.6B euro in loans from the ECB, while the market expected a reading above 150B euro. Still, markets are rather calm: the euro zone’s banks are under stress tests the results of which will be released by the end of October, so banks probably don’t want additional burden. Moreover, it’s only the first TLTRO, and there will be other ones in future. On Friday the market will be trading according to the result of the Scottish referendum. “Yes”-vote will be very negative for euro, while “no”-vote will support EUR/USD. Slightly better current account figures are expected in the euro area, though the economic calendar is rather empty. Recovery may take the pair to $1.2950 (base scenario). However, in general the fundamentals for euro still look weak compared with those for USD. The target remains at $1.2800/1.2790, and we expect to see it in the medium term.

British pound was the strongest currency of the day as markets are discounting the “No” campaign to prevail in the Scottish vote. The grade of uncertainty still remains high, however. Vote will finish at 21:00 GMT, while the results will be announced around 5:30 – 6:30 GMT.

The moves will clearly be less volatile if Scotland decides to stay. Pound will be bought, but we forecast the $1.6600 area to limit the immediate recovery. The “Yes” victory will trigger a strong downward move as this will be a true shock for the market. The $1.6000 support will easily be broken, bearish target will switch to the $1.5720 area. It is strongly recommended to limit your risks with stop loss orders tonight – no matter are you long or short.

Japanese yen was the weakest currency with USD/JPY surging to 108.80. The pair is overbought, but bullish sentiment remains strong. The 110.60 mark is now in sight – this is the 2008 high. Pay attention to the JPY crosses: EUR/JPY surged above 140 yen, while GBP/JPY broke to a new 6-year high of 178.