BNP - Long USD Vs EUR & GBP Remain Attractive Opportunities

Since the start of the week, the tone of ECB comments has been turning progressively more dovish, notes BNP Paribas.

"Following last week’s comments from Nowotny on the EUR’s strength, another ECB policymaker said on Monday the ECB was prepared for negative deposit rates. Although these comments are having little market impact against the backdrop of on-going US political uncertainty, we suspect they will play into a EUR sell-off once those uncertainties are resolved. Indeed, the EUR is already trading well above levels implied by relative interest rates," BNPP adds.

"Similarly, we expect the GBP to be vulnerable to an eventual USD bounce back due to both positioning and some further softening in in data, where our UK economist expects a below-consensus print on the September retail sales later this week," BNPP projects.

In line with this view,  BNPP holds a short EUR/USD position from 1.3510, targeting 1.28 with a stop at 1.3730. BNPP also holds a short GBP/USD position from 1.6040, targeting 1.5330, with a stop at 1.6310

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BNP Paribas: Stay Short EUR/USD Against 1.3730 & Sell Cable Against 1.6310

BNP Paribas maintains a short EUR/USD position from 1.3510, targeting 1.28 with a stop at 1.3730. 

"The overall level of activity in the eurozone is very weak, something that ECB speakers (including board member Constancio on Thursday) have been very keen to emphasize. We continue to see risks skewed towards further policy easing from the ECB, in contrast to the exit-focused Fed, and we remain short EURUSD as a trade recommendation," BNPP outlines its current macro-bias on the pair.

Meanwhile, BNPP added a fresh short GBP/USD position to its macro trade recommendations targeting a move down to 1.5330 with a stop set at 1.6310.

"A run of strong data and firm UK front-end rates have supported the GBP this month, but our STEER™ framework suggests GBPUSD is now very rich to short-term drivers (see chart) and our BNP Paribas FX Positioning Analysis indicates long positioning in Sterling is now very stretched. We think some combination of UK data disappointment, US data improvement, and dovish BOE messaging is likely to undermine GBPUSD in the weeks ahead and that risk-reward is attractive for new shorts at current levels above 1.60 heading into important data next week," BNPP says as rationale behind this call. 

Read More: http://www.efxnews.com/story/20937/stay-short-eurusd-against-13730-sell-cable-against-16310-bnp-paribas

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