13 AUG 2013 13:50 EDT
By eFXnews.com
Morgan Stanley maintains a macro tactical short EUR/USD trade from 1.3300 with a stop at 1.3440, and a target at 1.2700.
"We expect EUR to weaken over coming months as the market increasingly prices in German political developments. First, polls suggest Germany will maintain its current CDU/FDP government rather than a more EMU-friendly grand coalition. Second, the upcoming Constitutional Court decision could undermine the effectiveness of OMT. And despite better leading indicators, credit growth remains tepid," MS says as a rationale behind this call.
Along with that, MS also shares the consensus view that there is a strong bullish environment for the USD over the medium term on the potential of the Fed QE tapering.
Meanwhile MS has an active limit order to sell GBP/USD at 1.5570 with a stop at 1.5750 and a target at 1.4100.
"We believe that the market has misinterpreted the Bank of England’s forward guidance and now look to reestablish short GBP positions. The 7% unemployment threshold implies that rates will remain unchanged until 3Q16. This should further depress real rates, which are already well into negative territory. We believe that Governor Carney intends to boost UK asset-liability ratios to fight debt deleveraging - as such, we elect ‘not to fight the BoE," MS says as a rationale behind this call.
"We expect EUR to weaken over coming months as the market increasingly prices in German political developments. First, polls suggest Germany will maintain its current CDU/FDP government rather than a more EMU-friendly grand coalition. Second, the upcoming Constitutional Court decision could undermine the effectiveness of OMT. And despite better leading indicators, credit growth remains tepid," MS says as a rationale behind this call.
Along with that, MS also shares the consensus view that there is a strong bullish environment for the USD over the medium term on the potential of the Fed QE tapering.
Meanwhile MS has an active limit order to sell GBP/USD at 1.5570 with a stop at 1.5750 and a target at 1.4100.
"We believe that the market has misinterpreted the Bank of England’s forward guidance and now look to reestablish short GBP positions. The 7% unemployment threshold implies that rates will remain unchanged until 3Q16. This should further depress real rates, which are already well into negative territory. We believe that Governor Carney intends to boost UK asset-liability ratios to fight debt deleveraging - as such, we elect ‘not to fight the BoE," MS says as a rationale behind this call.
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