Next year’s forecasts and trades are rolling off

Danske is out with their top trades for 2019

1.Short EUR/NOK

  • A fundamentally compelling case is building for shorting EUR/NOK
  • Growth, carry, valuation, seasonality and positioning suggest a lower cross
  • Given year-end seasonality, we prefer to express our view via options

2.Long NOK/SEK

  • We recommend buying the NOK/SEK spot outright for a move towards 1.1400.
  • Relative growth, monetary policy, carry and positioning are set to support cross
  • Position embeds implicit hedge to EUR and year-end seasonality

3.Long USD vs funding basket

  • Respect the carry!Long USD versus a well-diversified basket (JPY, SEK, CHF)
  • Fed is under-priced and should not hesitate to add further to USD carry
  • JPY, SEK, CHF provide a funding basket that insulates from risk sell-offs

4.Long EUR/USD

  • Carry is a headwind but valuation suggests next big move in EUR/USD is higher
  • USD support from cyclical divide, tariffs and ECB-Fed divide to fade in 6-12M
  • We suggest buying a 9M EUR/USD call financed by a sold 3M straddle

5.Short EUR/GBP

  • We expect a ‘decent Brexit’ and target EUR/GBP at 0.83 in this scenario
  • But the path towards Brexit will most likely be prolonged and uneven
  • We suggest to position for GBP appreciation via a 1M 3M put calendar spread

6.Short NZD/CAD

  • We look for a rebound in the oil price, which should send NZD/CAD lower
  • The OPEC meeting on 6 December could mark a turning point for the oil market
  • We recommend a short NZD/CAD spot position for a move towards 0.83

7.Short EUR/HUF

  • We suggest to sell EUR/HUF spot to benefit from expected drop and a small carry
  • MNB set to become markedly more hawkish and hike early 2019 as inflation rises
  • While political risks remain for HUF, MNB is crucially set to move before ECB

Morgan Stanley had some of their views for 2019 out a week or so ago. You can find more bank notes and analysis on our research page.

Ryan Littlestone

Psychedelic chartist extraordinaire. Have your shades ready.
Philosophy: “Don’t be a Dick for a tick”

Read how Ryan got into trading here
Ryan Littlestone

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