In an interview with FXStreet, we discussed the frustrating range of EUR/USD and what could make it break out. We also discussed the next direction for the US dollar, the BOJ’s moves and more.
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When do you expect the EURUSD to break out from its current range?
EUR/USD, the world’s most popular currency pair, has been lately the most frustrating one. In terms of big central bank decisions, we will have to wait for December. However, the US elections and the tension towards them could provide an opportunity for a move. Monetary policy divergence favors the US dollar and so does the current positioning of safe-haven currencies. In case Trump edges closer to a victory or uncertainty remains high, the greenback could gain ground. In an event of an imminent Clinton victory, we could see the euro gain, enjoying the trade balance advantage. These moves could happen in mid-October, but previous disappointments with the pair warrant caution.
After the disappointing central bank meetings of this week, are you bullish or bearish on the USD?
While both the FED and the BOJ did not provide any imminent policy action, their moves were more significant. The US dollar could gain as the FED is still expected to raise rates, contrasting the BOJ, ECB and the BOE among others. The greenback remains the cleanest shirt in the dirty pile. The BOJ basically announced an open-ended policy targeting long-term rates and the ECB is set to prolong its QE program. This divergence makes me a dollar bull.
Which major central banks do you expect to be the next one to change its monetary policy?
The Bank of England is the next CB to act. Despite some encouraging post-Brexit data, the team led by Carney clarified they are set to add more stimulus, probably cutting rates in November. Hopefully this will come in conjunction with fiscal stimulus, now that the new government is free from the austerity doctrine of the previous one. However, the government does not seem keen to budge, leaving more of the heavy lifting to the Carney and co.
Will the USDJPY break below 100 in the short-term?
In the short-term, a dip under 100 on USD/JPY is certainly possible, as the pair is not that far away, and the yen still attracts safe-haven flows. However, verbal intervention from Japanese officials as well as well as the long-term easing of the BOJ mean that the move could be limited. I would eye 99, the post-Brexit swing-low, as the trough for any such dip.
What are the key technical levels for the Gold?
The technical levels I see for gold are 1375, 1365, 1353, 1300, 1278 and 1250. All in all, the current range is 1300-1353 in the short term. See the chart.
