Trade ideas: Recent CHF strength largely driven by Turkey crisis – What’s next for EURCHF?
By FX Trading Revolution Team
Recent CHF strength seems to be largely driven by the crisis in Turkey related to the Lira currency. Investors have flocked to the Franc on fears that Turkey’s crisis could spill over into Europe and the rest of the world. Some European banks are exposed to the Lira and further depreciation could cause bigger problems for the wider EU area.
Hence, the Swiss currency (CHF) has been among the strongest major currencies lately due to its safe-haven status as both Turkish and EU investors are looking for shelter in such turbulent times. But how long can this CHF strength last?
Massive depreciation of CHF (EURCHF rebounds) could follow in the event of de-escalation of Turkey’s crisis. On the contrary, if the situation worsens it will likely put further downside pressure on EURCHF.
Bearish pressures on EURCHF could last for a while, especially for as long as fears for European banks suffering from TRY depreciation exist. The SNB, however, would likely try to fight the bearish pressures in EURCHF which they can do by intervening in the Fx market or introducing changes to monetary policy.
All in all, it appears it’s too early to consider entering or adding to EURCHF longs. Some improvement in the situation in Turkey, as well as signs that the SNB is ready to help the Franc to weaken, would provide stronger confidence for entering long EURCHF.
Even At Record Highs, Microsoft Is Still A Buy
By Investing.com (Haris Anwar)
Microsoft (NASDAQ:MSFT) stock is trading around an all-time high. But there are no signs the rally is ending anytime soon.
Microsoft shares, now around $112, have almost doubled from two years ago. But the bulls aren’t done. The stock now has 31buy ratings from analysts, up from 26 at the start of the year and the most since late 2010, according to Bloomberg. On average, these analysts predict Microsoft shares will continue to climb, hitting $121 in the next 12 months.
What’s behind this extremely bullish sentiment about Microsoft? The company has successfully transformed itself into a leader in cloud computing, where many analysts believe the future growth is.
NZD/USD Vulnerable to US Tariffs & Trade War Fears, BoC Hike Bets
By Daniel Dubrovsky
New Zealand Dollar Fundamental Forecast: Bearish
Last week, rising trade war fears and emerging market concerns also weighed on Kiwi Dollar prices. The former was inspired by Donald Trump’s displeasure with North Korean denuclearization progress, accusing China of holding it back.
As for the latter, the Trump Administration threatened to impose an additional $200b in Chinese import tariffs as early as next week. If he follows through, China seems likely to retaliate. This would increase trade war concerns, likely denting stocks and the pro-risk New Zealand Dollar.
The New Zealand Dollar may also be vulnerable to the Bank of Canada policy announcement. Canada is expected to hold rates unchanged in September, but it may signal its intension to act soon. This would bring the Canadian Dollar closer to overtaking NZD in terms of yield, leaving the latter at risk.
Finally, the markets are still underpricing the probability of an additional Fed rate hike by the end of this year. Expectations that slowly align with the central bank’s outlook would bode well for US Dollar prices. This could occur on next week’s US jobs report. A combination of vulnerabilities that leave the New Zealand Dollar at risk from sentiment and monetary policy fundamentals prolongs the bearish outlook.
USD/JPY Forecast: From trade optimism to trade pessimism, NFP eyed as well
By Yohay Elam
The US is due to conclude its preparations for new duties on China on September 6th. The plan is to slap the world’s second-largest with duties on no less than $200 billion worth of goods, a severe escalation in comparison with the recent levies worth $50 billion.
Significant economic indicators also await the greenback in the first week of September. The ISM Manufacturing PMI kicks off the week, serving as the first hint towards the Non-Farm Payrolls.
Back in July, the US gained only 157,000 positions, below expectations. A more considerable increase of 180,000 is forecast for August. Wages are expected to rise by 0.3% MoM once again and to see an acceleration from 2.7% to 2.8% YoY. This is the last jobs report before the Fed convenes later in September and is set to raise rates.
If the US moves forward with the considerable escalation in trade wars, it is hard to see how market optimism prevails. A downturn in stocks could carry the USD/JPY down. An upbeat jobs report is unlikely to help. The downside seems more appealing.
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