From Morgan Stanley’s daily trade recommendations:
- The recent sharp decline of the USD now opens the way for potential corrective activity
- On several of our indicators the USD is starting to look bearishly overstretched near term
- However, we would continue to view any USD pullbacks as providing renewed buying opportunities
- We look to re-sell EURUSD rebounds, especially given the underperformance of European asset markets
- We await a deeper pullback in USDJPY to establish long positions (Indeed, we note that Japanese officials have expressed some concern regarding the pace of JPY weakness) (check this out from Japan PM today: … watching impact of weak yen on regional economies, small- and medium-sized companies)
- However, we expect the overall USDJPY uptrend to remain in place, although at a more moderate pace than seen recently
- GBPUSD rebounds are also likely to remain limited, given the moderation in UK data
