What is the structural bias for the USD, particularly EUR/JPY and GBP/JPY?
Here is their view, courtesy of eFXdata:
Societe Generale Research, maintains a structural bullish on the GBP over the core short EUR/USD. SocGen looks to rotates from short EUR/JPY trade to short the GBP/JPY if EUR/CHF rises back above 120.
“The Macron/Merkel is a proposal but only a proposalto make a step in the right direction. Therefore, it is a fascinating prospect, but not more. In practice, it is the inability of Europe to build sensitive economic architecture maintains the EUR/USD rate is about 20% below PPP. To correct this, and the EUR/USD will average of 1.30 for the next decade.
This proposal is not a correction of any type. For the moment, it is just something to snap out of euro shorts against the yen as much as the dollar. We are going to go bumping along the bottom of the post 2014 range, and in the post-2008 downward trend for a long time,” SocGen notes.
“In practical terms, it is we’ll stick to the EUR/USD shorts unless we break 120. If EUR/USD does break 120, while the united KINGDOM continues to rule out any extension for the “brexit” negotiations, we ’ll be very tempted just to double-down with a new pair GBP/JPY shorts,” SocGen adds.
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