NAB on the Australian dollar, forecasts:
- to around 0.74 at the end of 2020
- then to around 0.78 by the end of 2021
- 0.80 by end 2022
Archives of “Forex” category
rssAUD/USD slips below last week’s low
AUD/USD fighting to hold above 0.7222
AUD/USD briefly fell below last week’s low of 0.7222 but has now raised its head back above water as it’s bounced around by equity market sentiment.
On the ground, some restrictions were eased in Victoria but retail, hospitality, tourist and entertainment will be restricted until October 26. Offices will work from home until Nov 23.
Today’s NAB business conditions survey today fell to -6 from 0.
What struck me about last week was how well that AUD/USD held up. Yes, it fell 180 pips but given the run it’s had and the rout in equities, it could have been much worse. Now it’s fighting for 0.7222.
Brexit – UK says not afraid to walk away from talks. Less than 20% chance of a deal.
A couple of UK media items on Sunday with Brexit developments.
The UK’s chief Brexit negotiator David Frost spoke with the newspaper the Mail on Sunday
He said that the UK would leave the transition arrangement “come what may” in December. That is, deal or no deal the UK is out.
Meanwhile in the Sunday Times:
- planning for no-deal has ramped up
- senior figures in government have predicted that the chance of securing a Brexit trade agreement with Brussels is now less than 20%
Links for each (may be gated) if you’d like more
GBP is trading on wide spreads in early movement. Its just before:
- 8 am in NZ
- 6 am in Sydney
- 5 am in Tokyo
- and 4 am in Singapore & Hong Kong
If you are familiar with how forex market times work you’ll know that liquidity right now Is super thin. GBP swinging a little:
Dollar sellers dip a toe into the water
Euro and Australian dollar tick higher
Some signs of risk taking are appearing in the FX market as EUR/USD and AUD/USD bounce from the lows.
The S&P 500 is trying to make a bottom at the same time. This could just be the same kind of midday bounce we saw yesterday before a bigger rout into the close but it may have room to run.
AUD/USD
EUR/USD: Weekly close sub-1.1763 would target 1.15 – Citi
Citi on the US
Citi discusses EUR/USD technical outlook and flags scope for further downside.
“EURUSD peaked the week of 04 Sept 2017 at 1.2092 and entered into a deep correction that took it back to 1.1554 over 9 weeks. That was the deepest correction since the rally began in earnest in April that year. Thereafter it rallied higher to the 1.2555 Feb 2018 peak. Then, as now, weekly momentum was very overbought and started to turn lower,” Citi notes.
“Good support comes in between 1.1754 and 1.1782 and if that gives way then a deeper move towards 1.15 again would look an increased danger. A weekly close this week below 1.1763, if seen, would be a bearish outside week at the trend high and suggest more losses to come,” Citi adds.
EURUSD trades to highest level since May 2018 and tests 1.2000 in the process
Tests the May 13 week high and 1.2000 today.
The EURUSD traded to a high price today of 1.19967. That moved just ahead of the May 13, 2018 high price of 1.19957 (by a pip – highest level since May 3rd) and just short of the natural resistance at 1.2000. A break of the 1.2000 level (and stay above) would have traders targeting 1.2054 and 1.2092 as the next upside targets.
Drilling down to the hourly chart, the price move higher today occurred in the Asian session and stalled at the similar high (at 1.19967) during the early European session. That move took the price above a topside trend line but the break failed.
Getting above the trend line, and the high for the day along with the 1.200 level are obvious upside targets to get to and through.
On the downside, the swing hi from August 18 at 1.1965 is near a upward sloping trendline. The low corrective move after reaching the high today moved just below that level to 1.19604, but could not sustain selling pressure. Risk for longs looking for more upside would be a break below that level today.
The Australian dollar is the top performer this month
AUD/JPY is the best trade this month
The Australian dollar is up another 25 pips today to cap an impressive month.
AUD/USD came into August riding a four-month winning streak and had closed out July with an impressive rally to 0.7200 from 0.7000. It started the month with a sideways move and was down month-to-date as recently as last Monday but it finished the month on a six-day winning streak.
It’s now at the highest since July 2018.
Looking at the chart, there isn’t much standing in the way of a return to 80.00 but don’t expect a continued straight line to the upside.
The yen is the worst performer in August, narrowly trailing USD.
Dollar slumps into the London fix
Dollar at the lows of the day
The dollar is being hit particularly hard at the moment into the London fix. The Dollar Index is at its lowest since 2018.
The lone bright spot for the dollar today is against the yen but other wise it’s a miserable day.
Year-to-date, the Canadian dollar is now the only major currency that isn’t in positive territory vs USD and it’s not far from flipping.
London is closed today but there’s still plenty of international benchmarking into the fix and it’s going into a thinner-than-usual market today.
EUR/USD: To 1.25, USD/JPY: to 100 in the next year – SocGen
New forecasts from Societe General
Societe Generale Research updated its FX forecasts and now targets EUR/USD and USD/JPY at 1.18 and 105 respectively by end-2020 and at 1.25 and 100 by end-2021. “Our updated forecasts reflect our concern that EUR/USD in particular, has gone too far too fast, but it seems clear to us that we are at the start of a multi-year period of dollar decline, from very elevated levels,” SocGen notes.
“The yen still can’t fall far and is doing its job: ready to rally if global equities correct, doing little while they go up…A sterling short squeeze has dragged EUR/GBP below 0.90 but we doubt it can hold here for long, even if the outlook is still for the real trade-weighted index to bump along the bottom,” SocGen adds.
EUR/USD at the crossroads
A look at EUR/USD and what comes next
With much of Europe and the United States reeling from Covid-19, one beneficiary has been the euro, having risen to yearly highs vs the dollar this month.
After bottoming out in mid-March, the currency pair has seen its fortunes reverse, striking fresh yearly highs as investors flock behind the euro.
There are a few different factors in play however, all resulting in a net positive for the EUR/USD looking ahead.
Key points to watch
The recent gridlock in the United States’ Congress has eroded confidence in the US dollar. This has led to an all-out siege against the greenback, with the euro and gold scoring advances.
Partisan bickering between Republicans and Democrats shows no sign of abating anytime soon, with a fresh stimulus bill as elusive as ever. With key economic safety nets in danger of lapsing, the US economy is appearing more fragile than ever, which bodes poorly for the US dollar in H2 2020.
Conversely, Europe’s recent stimulus package has proved to be a dose of stability investors were looking for. Consequently, the EUR/USD has touched fresh highs and remains bullish.
Covid-19 continues to play a role in both Europe and the US, though the scale of the pandemic could not be more different between the two continents. Whereas the US has seen the death toll soar past 160k with upwards of 60k new cases per day, Europe has seen witnessed a fraction of this.
Internal strife and doubts over Donald Trump’s handling of the pandemic will continue to hamper any US dollar rally in the near-term. With an election scheduled in under 3 months, there is the potential for a wide range of factors, so this is one area to watch.
Finally, any dollar bulls will need to dial back expectations in H2 2020 after a recent tranche of economic data. The latest US unemployment data is further casting doubt on a V-shaped recovery, once touted by White House administration officials.
Few, if any experts now full expect a quick rebound in the US economy as Covid-19 continues to linger. A looming battle this fall surrounding school openings could also serve as an additional harbinger, with shuttered institutions doing little to promote economic growth. (more…)