Currency Analyst since 2010

Morgan Stanley: forecasts for the week

Analysts at Morgan Stanley shared their Forex expectations for the new week.

The specialists are bullish on USD. In their view, the greenback’s rally has potential to continue, though dollar needs help of rising long-term US bond yields to see gains against higher-yielding currencies. The bank recommends focusing on ISM and NFP releases.

As for euro, Morgan Stanley stays bearish, but looks take profit at $1.3100. Positioning has reached levels which in the pair triggered rebounds. The market’s focus is on the ECB.

The analysts are bearish on JPY as well: the market is not pricing further easing, so if the Bank of Japan acts, yen will weaken.

At the same time, Morgan Stanley is cautious about GBP/USD, but is bullish on GBP in crosses as they believe that the Bank of England will be among the first central banks to hike. Though data has moderated somewhat, it remains at robust levels that should support the currency. In addition, positioning has neutralized, suggesting room for additional longs.

As for AUD, the picture is neutral and the risks are balanced as there are both positive (Capex numbers) and negative factors (China’s slowdown). The currency may outperform if volatility remains low. Increase in volatility is the main risk for Aussie bulls.

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