Stay short GBP and CHF – Westpac

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 2, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    Research Team at Westpac, suggests that according to their model, macro and technical signals remain uniformly negative on GBP and CHF for a second consecutive week.

    Key Quotes

    “We are short GBP/USD from 1.4108 and long USD/CHF from 0.9945. GBP looks vulnerable to an oversold bounce but until the 23 June referendum definitively takes Brexit risk off the table GBP will likely struggle to mount a multi-day advance. Inability to capitalise on notably stronger wages and retail sales data last week confirm the poor underlying health of the currency.

    Growing expectations of aggressive ECB easing on 10 March should leave EUR/USD under pressure and should provide underlying support for USD/CHF, so long as EUR/CHF stabilizes above 1.08. Both CHF and GBP vulnerable to a resurgent USD, where spec positioning has been cut sharply if the CFTC is to be believed, just as evidence mounts (core CPI/PCE, hourly earnings) that the unused resources gap is finally closing.

    Our process yields a fresh short signal for EUR/USD though with only two of three inputs tilted lower we sell on strength via an order at 1.0995. A thicket of support in the 1.07-1.08 range likely provides only fleeting assistance ahead of the 10 March ECB.

    ECB likely struggles to over-deliver leaving EUR vulnerable to a squeeze in the wake of their meeting but beyond that the focus should be on unmistakable signs that the US has returned to a position of clear growth leadership vs the Eurozone, certainly that's the message painted by the relatively stronger US ISM, IP, retail sales and core US PCE data vs material disappointments on Eurozone PMIs, IP and core CPI data.”
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