USD weakness following the Fed meeting provides an opportunity to enter shorts, argues Morgan Stanley
“We note that the ECB is still dovish and, if anything, a slightly more dovish tone from the Fed adds pressure to the European Central Bank to stick to its aggressive easing stance. We would expect gains in EURUSD to be limited to the 200 DMA at 1.3665, and look for a move back to the June lows of 1.3500, opening the way for a larger move to our 1.3100 target,” MS projects.
In line with this view, MS entered a short EUR/USD position as a short-term recommendation from 1.3620, with a stop loss set at 1.37, and a target at 1.31.
Medium-term, MS is alos bearish on EUR/USD, and expresses this view via a limit order to sell at 1.3715, with a stop loss set at 1.3860, and a target at 1.32
Meanwhile, MS notes that GBP has received support from a hawkish set of BoE minutes, as well as hawkish comments from the BoE’s Haldane and Weale.
“Indeed, it seems that while the first BoE hike will be a 2015 story, we could see the first votes for a hike well before then. GBPUSD could see support from the divergence between the hawkish BoE comments and the less hawkish-than-expected FOMC meeting. We would look for the break above the key 1.7000 resistance level to be sustained, with a move towards the 1.7100 target to come over the next few weeks,” MS projects.
In line with this view MS maintains a long GBP/USD position as a short-term trade recommendation from 1.6770, with a target at 1.71. MS trailed the stop on this trade today to 1.69.