Thursday, October 29, 2015

EUR/USD: Take profit on shorts after ECB/Fed diverge - BNP

FXStreet (Bali) - EURUSD is now trading in line with BNP year-end target and as such, the bank turns now more neutral on the pair into year-end, suggesting to take profits on shorts.

Key Quotes

"The FOMC statement was more hawkish than we and the market anticipated. The statement noted the pace of job gains has slowed and that exports have been soft, but this was more than offset by more positive language on household spending and business investment."

"Language on the negative impact of recent global developments was removed, and specific reference was made to the conditions that might make it appropriate to hike “at the next meeting.”

"The message from the Fed is sharply divergent from the easing signalled by the ECB less than a week ago and the resulting move lower in EURUSD has pushed the pair through the 1.09 target on our short cash recommendation and we close the trade for an approximately 4.8% gain."

"We are also taking profit on the 1.10 put with a 0.9950 RKO which has been in our derivatives recommendations portfolio since June."

"EURUSD is now trading in line with our year-end target and we turn more neutral on the pair into year-end."

"The risk now is that the US data comes in too weak to support rate hike expectations or that ECB speakers sound more neutral in light of the big move in the effective exchange rate over the past few days."

"Our economics team still views a December hike as unlikely to materialize. Today, we expect a slower 1.7% q/q saar reading on Q3 GDP due to drag from inventories and trade, and softer numbers could lead markets to again question the Fed’s scope for delivering in December."
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