Go long EUR/USD: Trade of the week – Morgan Stanley

Dhwani Mehta FXStreet

In the view of the analysts at Morgan Stanley, the EUR/USD pair is expected to race higher this week. However, the only downside risk remains should the Eurozone April data disappoint markets.

Key Quotes:

“We like to buy EURUSD at market with a target of 1.1800 and stop of 1.1170

Optimism on growth in the rest of the world rebounding should weaken USD and help EUR. Rebounding China data should filter through to better Eurozone data over the coming months.

This could come through in this week's German April ZEW survey and Eurozone April flash PMI, helped further by easing Brexit concerns and generally stronger equity markets.

While EUR offers low funding costs, it is the EUR-funding related short positions which could push EUR higher as data improve. Over recent days, German 5-year breakeven rates have caught up with the rise in US breakeven rates, and EMU sovereign spreads have come in. This meets a market that is positioned very short EUR and very long USD.

The risk to this trade is a downside surprise in Eurozone April data.”

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

GBP/USD surrenders some gains, back to 1.3420

GBP/USD holds on to moderate gains above 1.3400 the figure on Friday. Optimism surrounding the UK government’s leadership transition and expectations of further BoE tightening support the British Pound, while easing tensions in the Middle East and fading Fed rate-hike expectations weigh on the US Dollar.

EUR/USD turns positive, targets 1.1450

EUR/USD now picks up pace and advances toward the 1.1440 region on Friday, up modestly for the day. With no major economic data due, lingering uncertainty over the US-Iran conflict keeps investors cautious, limiting the pair's upside.

Gold remains offered, still below $4,100

Gold struggles to extend Thursday’s rebound and navigates below the $4,100 mark per troy ounce on Friday. Uncertainty surrounding the Middle East conflict limits the precious metal’s upside, which is also under pressure amid rising US Treasury yields across the curve.

Week ahead – US CPI and Warsh testimony to take centre stage, BoC eyed too

US inflation report and Warsh testimony to headline the week. Dollar to dominate amid slew of other US data and Mideast tensions. Amid fresh Iran escalation, China GDP to shed light on Q2 impact. Bank of Canada not expected to follow RBNZ with rate hike.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June Federal Open Market Committee meeting landed mid-round-trip, describing a world that had already stopped existing.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.