Staying long USDCHF post-payrolls
We retain our positive USD bias following from Friday’s non-farm payrolls report which we think remain consistent with our assumption of Fed tapering by year-end. Markets concur with US 10Y real yields stabilise higher and EURUSD has continued to struggle to break above 1.3300. Our top recommendation is long USDCHF (entry 0.9300, target 0.9835, stop at 0.9160). The continued compression of peripheral spreads (Italy-German 10Y spread tightening continues; now 260bps vs. 279bps this time last week) should also help at the margin. Data wise, we only have non-manufacturing ISM today for which we project an increase from 52.2 to 53.0. Rhetoric from FOMC members will be gleaned; Fisher (today), Evans (Tuesday), Plosser (Wednesday) and Pianalto (Thursday). Positioning is cleaner as well with CFTC data showing speculative traders cutting USD longs heading into the FOMC meeting. Price action suggests this likely continued into Friday’s NFP.
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BNP Paribas