31 Dec 2015
Long USD vs short EUR and JPY – Goldman Sachs
FXStreet (Delhi) - Research Team at Goldman Sachs, suggests to go long USD against an equally-weighted basket of EUR and JPY at 100, with a spot target of 110 and a stop loss of 95. Annual carry is positive at around 1%.
Key Quotes
“The divergence between the Fed and both the ECB and BoJ will continue to be one of the more durable themes of 2016, in our view. In the US, we believe ongoing improvement in the labour market and resilience in domestic demand will ultimately drive a Fed tightening cycle that is more hawkish than the market is currently discounting.”
“And in Europe and Japan, the fragility of their economic recoveries and lower starting point for inflation mean that the policy stance will remain dovish and will lean against the Fed. Currencies are particularly sensitive to this divergence pressure and, despite the strength we have seen so far, we believe the USD has more room to appreciate vs the EUR and JPY.”
Key Quotes
“The divergence between the Fed and both the ECB and BoJ will continue to be one of the more durable themes of 2016, in our view. In the US, we believe ongoing improvement in the labour market and resilience in domestic demand will ultimately drive a Fed tightening cycle that is more hawkish than the market is currently discounting.”
“And in Europe and Japan, the fragility of their economic recoveries and lower starting point for inflation mean that the policy stance will remain dovish and will lean against the Fed. Currencies are particularly sensitive to this divergence pressure and, despite the strength we have seen so far, we believe the USD has more room to appreciate vs the EUR and JPY.”