FXstreet.com (San Francisco) - Wells Fargo expects "European events in the coming weeks to evolve favorably rather than unfavorably, with market sentiment taking more steps forward than back," according to a Nick Bennenbroek and Vassili Serebriakov's analysis published by the bank. Wells Fargo also believes "that the euro can rally towards the June high near at 1.2750 and the psychological target of $1.3000."
On Friday, the EUR/USD closed the week at 1.2325, near to the 'magic number' for analysts at Danske Bank that are suggesting to go long at 1.2323, targeting August highs at 1.2444. In the opinion of Axel Rudolph, expert at the German lender, the cross could revisit 1.2395 (MA55d) while trading above 1.2255. He also adds "only a drop through Thursday’s 1.2255 low will put the 1.2162/33 support zone, and then the 1.2042 on the map. These downside targets will remain in focus while the MA55d at 1.2395 caps".
On the other hand, Commerzbank's economist Antje Praefckesays says that as far as the "Forex market is currently lacking clear direction in regard to the main currencies," the "EUR-USD is likely to continue its sideways trading with an underlying downward tendency."
Meanwhile, Praefckesays points that "During the summer break there are unlikely to be any new developments through the official channels. The issues of debt crisis and QE3 are not likely to progress before September."
Marc Chandler from BBH agrees with Praefckesays and he asks to have 'aim high in steering,' "which means that rather than look a few feet in front of the car, look further down the road." Chandler commented in a recently published report that "given current market conditions, summer vacations and the numerous key events in September," investors are good "served by the auto advice."
"Fasten Your Seatbelts" says BBH in its foreign Exchange Quarterly. The bank invites us to see the "big picture." The European events will "continue to be the single largest influence of the overall investment climate. The crisis is likely to deepen and this will likely weigh on risk appetite in general and lead to a modest strengthening of the dollar," says BBH.
"Fed monetary policy will remain focused on Operation Twist in Q3," continues BBH. "Fiscal policy issues are likely to gain ascendancy, especially in the politically charged environment of political party conventions and the start of the campaigns proper toward the end of Q3."
"European problems seem more intractable and this has helped preserve the safe haven bid for U.S. Treasuries. There is no reason to expect any meaningful resolution ahead of the November elections," states Chandler's BBH. "After all, that is in part what the election will be fought over. While we expect the dollar to trade higher in Q3, we are not as sanguine about Q4, especially after the election, regardless of the outcome."
In the European side, Danske bank has as main scenario "that within the next couple of months Spain will ask for EFSF/ESM intervention." Dankse clarifies that "there has been some speculation that the ECB will await the ruling of the German Constitutional Court (12 September) before intervening in the bond markets."
BBH's analyst "are skeptical" regarding the speculations on Spain is likely to formally request assistance within days. "It does not make much sense to do so ahead of the auditors report on the banks' capital needs. Moody's is expected to finish its review of Spain's credit rating in the Sept-Oct period."
Nevertheless, "IMM currency futures show a net speculative short position of 164,000 contracts in early August, a third lower than the peak short position from early June, but still substantial," says Wells Fargo's report. It is "clearly, a shift in market sentiment could easily see a shift to more balanced euro positioning."
As I write before, Wells fargo expects "European events in the coming weeks to evolve favorably rather than unfavorably." The Banks considers that 1.2750 and 1.3000 targets would provide a better opportunity for corporates to hedge euro receivables, as well as providing better selling opportunities for investors."
According to TD Securities, "CFTC data showed IMM currency speculators further trimming their net long exposure to the USD in the week through Tuesday, August 14th. The net long position now stands at USD4.5 bn by our calculation, a level that hasn’t been seen since mid September 2011."
TD's anaysts believe that the "persistently large EUR net short position was marginally extended after reaching its smallest size in three months last week."
"Net short positioning extended to 137.8k contracts (or the equivalent of USD21.2 bn), from 131.7k last week," they concluded.
On Friday, the EUR/USD closed the week at 1.2325, near to the 'magic number' for analysts at Danske Bank that are suggesting to go long at 1.2323, targeting August highs at 1.2444. In the opinion of Axel Rudolph, expert at the German lender, the cross could revisit 1.2395 (MA55d) while trading above 1.2255. He also adds "only a drop through Thursday’s 1.2255 low will put the 1.2162/33 support zone, and then the 1.2042 on the map. These downside targets will remain in focus while the MA55d at 1.2395 caps".
On the other hand, Commerzbank's economist Antje Praefckesays says that as far as the "Forex market is currently lacking clear direction in regard to the main currencies," the "EUR-USD is likely to continue its sideways trading with an underlying downward tendency."
Meanwhile, Praefckesays points that "During the summer break there are unlikely to be any new developments through the official channels. The issues of debt crisis and QE3 are not likely to progress before September."
Marc Chandler from BBH agrees with Praefckesays and he asks to have 'aim high in steering,' "which means that rather than look a few feet in front of the car, look further down the road." Chandler commented in a recently published report that "given current market conditions, summer vacations and the numerous key events in September," investors are good "served by the auto advice."
"Fasten Your Seatbelts" says BBH in its foreign Exchange Quarterly. The bank invites us to see the "big picture." The European events will "continue to be the single largest influence of the overall investment climate. The crisis is likely to deepen and this will likely weigh on risk appetite in general and lead to a modest strengthening of the dollar," says BBH.
"Fed monetary policy will remain focused on Operation Twist in Q3," continues BBH. "Fiscal policy issues are likely to gain ascendancy, especially in the politically charged environment of political party conventions and the start of the campaigns proper toward the end of Q3."
"European problems seem more intractable and this has helped preserve the safe haven bid for U.S. Treasuries. There is no reason to expect any meaningful resolution ahead of the November elections," states Chandler's BBH. "After all, that is in part what the election will be fought over. While we expect the dollar to trade higher in Q3, we are not as sanguine about Q4, especially after the election, regardless of the outcome."
In the European side, Danske bank has as main scenario "that within the next couple of months Spain will ask for EFSF/ESM intervention." Dankse clarifies that "there has been some speculation that the ECB will await the ruling of the German Constitutional Court (12 September) before intervening in the bond markets."
BBH's analyst "are skeptical" regarding the speculations on Spain is likely to formally request assistance within days. "It does not make much sense to do so ahead of the auditors report on the banks' capital needs. Moody's is expected to finish its review of Spain's credit rating in the Sept-Oct period."
Nevertheless, "IMM currency futures show a net speculative short position of 164,000 contracts in early August, a third lower than the peak short position from early June, but still substantial," says Wells Fargo's report. It is "clearly, a shift in market sentiment could easily see a shift to more balanced euro positioning."
As I write before, Wells fargo expects "European events in the coming weeks to evolve favorably rather than unfavorably." The Banks considers that 1.2750 and 1.3000 targets would provide a better opportunity for corporates to hedge euro receivables, as well as providing better selling opportunities for investors."
According to TD Securities, "CFTC data showed IMM currency speculators further trimming their net long exposure to the USD in the week through Tuesday, August 14th. The net long position now stands at USD4.5 bn by our calculation, a level that hasn’t been seen since mid September 2011."
TD's anaysts believe that the "persistently large EUR net short position was marginally extended after reaching its smallest size in three months last week."
"Net short positioning extended to 137.8k contracts (or the equivalent of USD21.2 bn), from 131.7k last week," they concluded.
