Bank of America Merrill Lunch FX Strategy Research outlines its FX trading strategy for the rest of 2017.
Starting with the USD, BofAML argues that the trigger for a meaningful move higher in USD will be strongly predicated on progress on tax reform, and USD bulls will need to be more selective.
On the EUR, BofAML notes that following the French elections, the focus for the EUR shifts to the ECB QE tapering debate this fall, and as both the Fed and the ECB will be tightening policies, while the BoJ remains on hold, BofAML recommends long both USD and EUR against JPY, while sees the EUR/USD outlook as being mixed for the rest of the year.
On GBP, BofAML is concerned that the consensus has become too positive on Brexit, and expects that a tough negotiation ahead will likely see GBP/USD trading below 1.25 again over the coming months.
All in all, BofAML’s trading strategy for the remainder of the year is to long EUR, USD, and NZD, and short JPY, GBP, AUD and CHF.
Source: Bank of America Merrill Lynch Rates and Currencies Research
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