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The 3 reasons EUR has bottomed against the USD and yen

  
Analysis, Forex
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A quick snippet from Mizuho in Japan on the euro. Citing three reasons it has bottomed out:

  • European Central Bank’s easing options are limited
  • Brexit uncertainties a negative for GBP against EUR
  • Chatter of fiscal stimulus
On the ECB:
  • to hold back from restarting asset purchases on Thursday
  • likely to cut negative policy rate further, to -0.5%, but room for further cuts is limited
Forecast:
  • 1.15 possible by year-end
A quick snippet from Mizuho in Japan on the euro. Citing three reasons it has bottomed out:Last one for Dr. D

Tariffs threat to see euro fall to 1.07 against the dollar in three months – ING

  
Analysis, Forex

ING lowers their forecasts for the euro

ING

The firm argues that the euro will weaken to levels last seen in 2017 against the dollar due to threats stemming from US trade policy. Noting that:

“Further deterioration in the US-China trade war will drive the euro lower. But there is also a non-negligible risk of the US imposing, or at least threatening to impose auto tariffs on Eurozone exports. An overhang of such tariffs should weigh on the euro.”

Expanding further, the firm also views that the market already has “very aggressive” expectations of the Fed easing and that makes it hard for the US central bank to surprise and precipitate dollar weakness against the euro.
Adding that the dollar still enjoys high carry and that makes its positioning for a decline – in terms of yields – as “unattractive”.
Also, they no longer see EUR/USD as being undervalued so that won’t provide a supportive factor to the pair and notes that short positions are not stretched:

“This means that EUR shorts can still be built and positioning does not act as a limiting factor behind the EUR/USD fall.”

CFTC commitment of traders: EUR shorts increase by 10K this week

  
Analysis, Forex

Forex futures positioning data among non-commercial traders for the week ending September 3, 2019

  • EUR short 49K vs 39K short last week. Shorts increased by 10K
  • GBP short 85K vs 89K short last week. Shorts trimmed by 4K
  • JPY long 28K vs 34K short last week. Longs trimmed by 6K
  • CHF short 6k vs 4k short last week. Shorts increased by 2K
  • AUD short 59k vs 61k short last week. Shorts trimmed by 2K
  • NZD short 31K vs 26K short last week. Shorts increased by 5K
  • CAD long 5K vs 11K long last week.  Longs trimmed by 6K
  • Prior week

Commitment of traders Euro shorts increase by 10 K in the current week

A couple of Brexit scenarios to ponder (and what they mean for EUR/GBP)

  
Analysis, Forex
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An overnight bank note (Rabo) on Brexit and euro / sterling

(in brief, and note this prior to Wednesday’s UK voting)
If legislation to rule out a no deal Brexit is rushed through parliament, the pound can be expected to rise. If it were decided that the Brexit deadline were to be extended but that the legal default position of the UK remains that a no deal Brexit could still take place at a future date, GBP may also rise, but by a lesser amount – since kicking the can down the road is not a solution.
  • In this scenario we would expect EUR/GBP to be trading in the 0.90 area on a 1 to 3 month horizon.
If a no deal Brexit is ruled out will would expect EUR/GBP to clamber back towards the 0.86 area in 3 months. 
If fresh legislation is not passed and the UK remains on course for a no deal Brexit in October we would expect EUR/GBP to rise firstly back towards the recent high in the 0.9325 area. 
How high EUR/GBP can go may then depend on whether the EU summit in mid-October brings any compromises.” “On a no deal Brexit on October 31, we expect EUR/GBP to rise towards parity.

Morgan Stanley revise forecasts higher for yen, CHF

  
Analysis, Forex

A note from MS late last week with a set of look ahead forecasts

The bank expects further strength of yen and Swiss, lower EM and commodity currencies
  • USD index to remain supported
  • risk and growth outlook likely to weaken further
  • further trade tensions
  • Fed less likely to turn more dovish
  • risk of a global recession rising
Forecasts:
               Q4                                    Q1 2020
USD/JPY  101 (from 102 previously)    100 (100)
EUR/USD 1.15 (from 1.16)                 1.17 (1.18)
EUR/CHF 1.08 (1.17)                         1.10 (1.18)

Argentina imposed currency controls over the weekend – restricts buying of USD

  
Analysis, Forex

Banco Central de la República Argentina has restricted sellers of pesos, concerned on the rundown in reserves

Statement:
 “Given various factors that impacted the evolution of the Argentine economy and the uncertainty in the financial markets, the executive branch needed to adopt a series of extraordinary measures aimed at ensuring the normal functioning of the economy, sustaining the level of activity and employment and protecting consumers”
  • restricts buying more than $10,000 US per month, or making transfers exceeding that amount per month
  • requires companies to sell their dollars from exports in the local market, not permitted to hold the dollars
On Friday the central bank announced banks need to seek prior authorization before distributing their earnings
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