BNP Paribas G10 FX Momentum signals

15 December,, London – After analysing the market before the Fed decision, BNP Paribas has shared the latest G10 FX Momentum signals based on the strength of a currency’s trend taking into an account FX price action, equities and rates. This time, we have also added signals from BNP Paribas’ quant model “STEER.”

G10 FX Momentum signals

G10 FX Momentum signals

Source: BNP Paribas

The USD’s upward momentum continues to strengthen, scoring 84 on a scale from -100 to 100, nearing its year to date peak of 90. In the prior week, a pick-up in the USD’s FX momentum, as the market positioned for the upcoming FOMC week, has added to an increase in the overall score.

“The NOK and CAD have the strongest bearish trends in G10, suggesting that USDNOK and USDCAD are likely to continue to trend higher,” BNP Paribas added.

In addition, momentum is also bearish for the AUD, although more than twice weaker, with a score of -19 out of -100. BNP Paribas argues that their metric outlines that an outperformance of Reserve Bank of Australia (RBA) interest rates has prevented the Australian Dollar momentum from turning more bearish.

Consider reading: Barclays all-in-one about Fed rate hike

While the EUR, NZD, and SEK fluctuate around a neutral point indicating equilibrium. In particular, we could argue that currency investors await further stimulus to help decided the direction of further EUR positions, following last week’s ECB disappointment. Should the Fed this week increase interest rates, we could expect “buy the rumour, sell the fact” phenomenon possibly resulting in a sharp rally in EURUSD. In fact, we might see the same outcome if the committee would restrain once more.

BNP Paribas' quant model 'STEER'

Meanwhile, the latest weekly data from BNP Paribas' quant model 'STEER' suggest that the AUD and NZD are still overvalued versus the USD.

G10 FX Momentum signals

"STEER is bearish on AUDUSD and NZDUSD, targeting 0.6856 and 0.6223, respectively," BNP Paribas adds.

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