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UBS FX Strategy: Spot Desk – More USD Buying

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Spot Desk – More USD Buying

Zurich Spot Desk

EURUSD: Market participants that took advantage of the short squeeze earlier in the week were happy to take some profit ahead of the 1.1200 level that was toppish for almost two months; the pair has dropped 500 pips from the Monday high. Expect buying interest below 1.1200, while sellers will be lined up ahead of 1.1360/70. Flows are split between those piling into fresh USD longs and short term profit-takers. Support at 1.1230, 1.1200, and 1.1150; resistance at 1.1270, 1.1305, and 1.1365.

USDCHF: The US dollar has been trading strong after good US data, and many in the market had to jump on the bandwagon after getting squeezed out of position earlier in the week. We think the rally in risk is still fragile and volatility will surely persist for a while. The pair has tested the resistance at 0.9660/80, so if you are looking for a level to sell at, that might be it. Support at 0.9580 and 0.9541. Despite the strong rally yesterday, EURCHF remains in range. Support at 1.0750; resistance at 1.0880/1.0900.

Cable continued its downtrend yesterday, but stopped abruptly at the 200-day moving average. The pair was offered all day with the US dollar being bought across the board. EURUSD came off its high and we saw GBPUSD trade through the 100-day moving average at 1.5472 and then below 1.5400. It feels like US dollar buying could continue at lower levels. GBPUSD support at 1.5371, 1.5330, and 1.5191; resistance at 1.5454, 1.5508, and 1.5594.

EURGBP: We are biased towards selling rallies to the 200-day moving average at 0.7360. Support at 0.7279, 0.7260, and 0.7200; resistance at 0.7359, 0.7400, and 0.7421.

AUDUSD has been grinding higher on the sharp bounce in risk-on sentiment and the correction for oil. The poor capex figures yesterday and higher US yields probably explains why the pair’s move higher has been reluctant. Watch USD/EM to see if there is a further correction. If so, AUDUSD could trade back up to 0.74/0.75. We are skeptical that this rally in risk is sustainable, but recommend staying flexible because there has only been a small AUDUSD so far, relative to the moves for USDJPY and EURUSD.

NZDUSD has been trading in-sync with AUDUSD. There should be decent support at 0.6400, with the risk of a move up to 0.66/0.67.

USDCAD is trading around the same level as yesterday, but oil has gained a lot of ground, so as long as the general picture doesn’t change we are happy to be short up to 1.3220/30, with a stop above 1.3250, targeting a move towards 1.3140/50.

EURSEK and EURNOK came under pressure yesterday, with the latter leading the way on the correction for oil. Sell rallies in EURSEK towards 9.60, with a stop above 970; it is currently trading just above the support at 9.49/9.50. Sell EURNOK rallies between 9.40 and 9.50, with a stop above 9.60. The key pivot in the downside is 9.20. Swedish retail numbers are due this morning at 9:30am CET, with Norwegian unemployment data at 10:00am CET.

Forex Analysis, Forex Strategies | August 28, 2015