11 August, AtoZForex.com, Vilnius – Bank of America Merrill Lynch has provided advice and Forex facts for traders on how they ought to position in the market over the upcoming weeks and months.
First, "The best trades are usually those for which all the stars are aligned. Unfortunately, this is currently not the case with US rates and the key USD crosses like EURUSD and USDJPY," BofA begins.
Second, as the markets have already priced in a 70% possibility for a Fed lift-off in September, the market needs to acknowledge additional hike before year-end in order for the US rates to soar higher or for the USD to make a notable advance against EUR or JPY.
Third, however, the December FOMC meeting is still far away and having a thick uncertainty covering the Chinese outlook, “we would caution against aggressively shorting US rates or running large short EURUSD or long USDPY positions in the short-term despite our medium-term bullish USD view," BofA advises.
Forth, "The commodity market will likely remain the main battle field on which China bulls and bears square off,” points Merrill Lynch. All other markets will be on alert and adjust accordingly to the outcome. From the commodities’ side, oil and copper will be on the spotlight for the FX and rates markets, as crude oil price is the key driver for TIPS breakevens and currently for USDCAD and USDMX.
Fifth, "In the meanwhile, we are still holding onto our long USDCAD position but very cognizant of the fact speculative short positions in both oil and CAD are near extreme levels," Bank of America Merrill Lynch finishes.