From the FXWW Chatroom: BAML: BofAML Chief Technical Strategist Paul Ciana opens a long USD/CHF spot trade following the trend higher out of the triple bottom formed this summer. Spot has closed above multiple resistance levels including the triple bottom resistance of .9775, the 200d SMA and a trend line. Supporting the uptrend includes the rising 50d SMA and 100d SMA of which the 50d recently crossed above the 100d. The RSI also shows the uptrend isn’t overbought yet. RSI’s rise to new YTD highs adds confirmation to price breakouts. Paul Ciana recommends a tactical trade of buying USD/CHF spot ref at .9844 with a target of 1.0120. He places a stop at .9747 which is just below the Friday October 20th low and daily trend line support. The risk to this trade may be a loss of about .0097 if the stop is reached.
BAML: BofAML FX Strategist Vadim Iaralov recommends selling EUR/AUD and EUR/NOK crosses ahead of the ECB meeting this week where BofAML is expecting a dovish Draghi. The latest CFTC survey shows EUR speculative longs are near a five-year high at 20% of open interest. The FX Strategy team’s trend model shows that the EUR uptrend is at risk of reversal on the crosses. The EUR/AUD uptrend in particular is undermined by price action reflecting stretched positioning. The elevated Up-Down vol indicator shows volatility greater on the way down where stops are at risk. Risk reversal in EUR/AUD has dipped recently, tilting towards EUR puts ahead of the ECB. The team recommends selling EUR/AUD with a spot reference of 1.5045 as their trade of the week. The positioning and trending model also shows the EUR/NOK uptrend is getting stretched. Negative downside risks for EUR/NOK are elevated ahead of the ECB. In addition, Norwegian equities have outperformed over several time horizons, which allowed NOK to be supported by both the team’s OCTAVE and FORTE models.
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