The strong USD momentum highlighted in our last FX Radar has started to fade and our views from that previous
publication have performed well. Looking ahead, we are entering a year-end period characterized by strong seasonal patterns
and we currently observe that none of the G10 pairs look stretched in terms of positioning and mean reversion, with the exception
of USD/CNY which seems to be overbought at the moment. However, historical mean reversion trends for CNY do not show
strong indications of following such patterns.
EURCHF has entered negative technical momentum, while the reversal signal has further room to develop before indicating an oversold condition, and positioning is not yet stretched. The Swiss franc demonstrates a strong seasonal pattern on the 1 month horizon, which would imply that EURCHF could grind lower. Sterling (GBP) has scope to weaken on European crosses in December due to seasonality divergence but also a built-up long GBP position on crosses (vs CHF, Euro and SEK). JPY stands out with a long technical momentum signal against the dollar and does not yet look oversold. Positioning in JPY (vs. USD) is currently short, and the seasonal pattern suggests there may be further upside potential for the yen.- SEB
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