FXstreet.com (San Francisco) - Wells Fargo expects "European
events in the coming weeks to evolve favorably rather than
unfavorably, with market sentiment taking more steps forward than
back," according to a Nick Bennenbroek and Vassili Serebriakov's
analysis published by the bank. Wells Fargo also believes "that the
euro can rally towards the June high near at 1.2750 and the
psychological target of $1.3000."
On Friday, the EUR/USD closed the week at 1.2325, near to the
'magic number' for analysts at Danske Bank that are suggesting to
go long at 1.2323, targeting August highs at 1.2444. In the opinion
of Axel Rudolph, expert at the German lender, the cross could
revisit 1.2395 (MA55d) while trading above 1.2255. He also adds
"only a drop through Thursday's 1.2255 low will put the 1.2162/33
support zone, and then the 1.2042 on the map. These downside
targets will remain in focus while the MA55d at 1.2395 caps".
On the other hand, Commerzbank's economist Antje Praefckesays says
that as far as the "Forex market is currently lacking clear
direction in regard to the main currencies," the "EUR-USD is likely
to continue its sideways trading with an underlying downward
Meanwhile, Praefckesays points that "During the summer break there
are unlikely to be any new developments through the official
channels. The issues of debt crisis and QE3 are not likely to
progress before September."
Marc Chandler from BBH agrees with Praefckesays and he asks to have
'aim high in steering,' "which means that rather than look a few
feet in front of the car, look further down the road." Chandler
commented in a recently published report that "given current market
conditions, summer vacations and the numerous key events in
September," investors are good "served by the auto advice."
"Fasten Your Seatbelts" says BBH in its foreign Exchange Quarterly.
The bank invites us to see the "big picture." The European events
will "continue to be the single largest influence of the overall
investment climate. The crisis is likely to deepen and this will
likely weigh on risk appetite in general and lead to a modest
strengthening of the dollar," says BBH.
"Fed monetary policy will remain focused on Operation Twist in Q3,"
continues BBH. "Fiscal policy issues are likely to gain ascendancy,
especially in the politically charged environment of political
party conventions and the start of the campaigns proper toward the
end of Q3."
"European problems seem more intractable and this has helped
preserve the safe haven bid for U.S. Treasuries. There is no reason
to expect any meaningful resolution ahead of the November
elections," states Chandler's BBH. "After all, that is in part what
the election will be fought over. While we expect the dollar to
trade higher in Q3, we are not as sanguine about Q4, especially
after the election, regardless of the outcome."
In the European side, Danske bank has as main scenario "that within
the next couple of months Spain will ask for EFSF/ESM
intervention." Dankse clarifies that "there has been some
speculation that the ECB will await the ruling of the German
Constitutional Court (12 September) before intervening in the bond
BBH's analyst "are skeptical" regarding the speculations on Spain
is likely to formally request assistance within days. "It does not
make much sense to do so ahead of the auditors report on the banks'
capital needs. Moody's is expected to finish its review of Spain's
credit rating in the Sept-Oct period."
Nevertheless, "IMM currency futures show a net speculative short
position of 164,000 contracts in early August, a third lower than
the peak short position from early June, but still substantial,"
says Wells Fargo's report. It is "clearly, a shift in market
sentiment could easily see a shift to more balanced euro
As I write before, Wells fargo expects "European events in the
coming weeks to evolve favorably rather than unfavorably." The
Banks considers that 1.2750 and 1.3000 targets would provide a
better opportunity for corporates to hedge euro receivables, as
well as providing better selling opportunities for investors."
According to TD Securities, "CFTC data showed IMM currency
speculators further trimming their net long exposure to the USD in
the week through Tuesday, August 14th. The net long position now
stands at USD4.5 bn by our calculation, a level that hasn't been
seen since mid September 2011."
TD's anaysts believe that the "persistently large EUR net short
position was marginally extended after reaching its smallest size
in three months last week."
"Net short positioning extended to 137.8k contracts (or the
equivalent of USD21.2 bn), from 131.7k last week," they