MS: trade recommendations

Morgan Stanley sold EUR/USD at $1.3800 with target at $1.3300 and stop order at $1.3970 and bought USD/JPY at 97.25 with target at 103 and stop at 96.26. According to MS, a move back above the 98.55 level “would stabilize the outlook once again”.

The analysts argue that USD weakness is temporary and once the Fed policy path becomes clearer, it will regain what it has lost in the recent weeks. In their view, the ECB policy will come in focus in the weeks ahead capping EUR on the upside. Japanese investors resumed their overseas bond markets following the recent repatriation. Net foreign bond buying by Japanese investors jumped last week to a 2-month high of $14.5 billion, encouraged by the resolution of the US fiscal impasse and yields on Japanese government bonds falling to a 5-month low.


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