Investors following short-term macro strategies should consider selling EUR/USD and selling USD/JPY this week, advises Barclays Capital in its weekly FX pick(s) to clients.
On the EUR/USD trade, it's a tactical short into the ECB meeting on Thursday. Barclays' rationale behind this call is as follows.
"Although market expectations for ECB action (Thurs) have grown due to the weak inflation print, we think a December move is much more likely than at next week’s meeting. As such, an unchanged rate setting may lead to a knee-jerk EUR/USD move higher. However, we expect dovish rhetoric at the press conference from ECB President Draghi to keep a December move in play. We would therefore recommend using any EUR rally as a better entry level to re-engage in EUR/USD downside," Barclays clarifies.
On the USD/JPY trade, it's a tactical short into the US jobs report on Friday. Barclays' rationale behind this call is as follows.
"We look for headline NFP of 125K and unemployment rate of 7.5% (consensus: 125K, 7.3%). While the three-tenth rise in unemployment rate we expect is due to the federal government shutdown and transitory, knee-jerk USD selling is likely post-data release," Barclays adds.
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