Review: Yesterday there was only little relevant news and hence the negative market sentiment from Friday was still prevalent. However, there were a few encouraging elements – for instance the German trade figures were quite decent relative to expectations (particularly exports offered a positive surprise) and, moreover, the permanent European rescue fund (ESM) was finally established. However, neither of these pieces of news affected the market.
Last night/overnight we saw the IMF World Economic Outlook, and the 2013 estimate for global growth was revised down from 3.9% to 3.6%. However, the IMF is always lagging ’behind the curve’ with a low value. The IMF expects growth in Europe of 0.2% in 2013, but this is based on the assumption that the reforms are continued and the initiatives that have been launched are successful (optimistic?)
New opinion poll in the US suggest swing toward Mitt Romney. From the point of view of FX trading, a victory to Romney will most likely weaken the safe havens (JPY, USD d i t EUR).
Market sentiment: Still a negative market sentiment, yet the accounts-reporting season that begins in the US today may change the sentiment. As stated yesterday, Greece still attracts negative attention, but there are no indications that a decision will be made as to whether the next 'loan tranche' is to be paid to the Greeks this week. It is difficult to imagine circumstances that will change the sentiment noticeably in the short term. USD, JPY, GBP and to some extent NOK and SEK will fall relative to EUR.
Today’s macro-economic news: Yet another day with only very few economic indicators to speak of. However, if the UK trade balance and industrial production data disappoint, the recent weakening of GBP may accelerate. We recommend to sell GBPUSD and in the long term (3-6M) we have a negative view of GBP.
EURUSD (NEUTRAL): We maintain our recommendation to place a buy order at 131.85. If the order is executed, we recommend S/L at 130.45.
Over this week (and presumably until the end of next week) the prospects for EURUSD will be slightly negative. The uncertainty relating to Greece as well as the strong likelihood of continuing weak economic indicators from both the US and Europe will contribute to keeping the sentiment predominantly negative for EUR and positive for USD. Today Merkel pays a visit to Greece and she will be met by large demonstrations. We still expect that over the coming three months the upside (target at 138) will come into play.
There is strong resistance in the range of 131.70-132, which is the top from September as well as the falling, black, dotted trend line. Strong support at 128.24 (200MA). The next very strong level of support will be at 127.05. A breach points down to 120.50.
EURUSD vs. gold
EURJPY (BUY): We recommend that investors buy EURJPY. S/L to 101.15. Trading took place close to the stop order, but according to our spot dealers clients have been stopped out.
EURTRY (NEUTRAL): Strong support is found at the level of 230. We expect this level to hold J Source: Bloomberg/Jyske Bank firm, and that in the short term the cross rate has a target area of 236-240.
GBPUSD (SELL): We recommend investors to SELL GBPUSD with a target at 156.85 and S/L at 163.20.
We expect that GBPUSD has peaked this time around. A breach of 160-160.60 will be a decisive signal of further downside.
Due to the budget problems in the UK, GBP has come under pressure. The economic indicators to be released in the UK today (industrial production and trade balance) may decide whether we see a breach of the level at 160.
EURSEK (from Neutral to BUY): We recommend SELL; S/L at 866. T/P at 843. Even though we expect SEK to weaken over the coming three months, we see an attractive technical sales pattern (double top formation) in combination with predominant expectations of a negative sentiment until the end of next week.