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Goldman Sachs upgraded ANZ to a buy recommendation (from neutral), with its price target being raised to A$36.81. This constitutes a near 15% return if you take into consideration the 5% dividend yield. The catalyst the bank flag for gains include a strong mortgage franchise, well positioned for business credit recovery, valuation support and upside in Asia.
Having closed my EUR/AUD short on Friday, I am looking for rebounds this week to sell into. After falling 3.2% from May 21, selling at the 38.2% retracement of this move at 1.4560 could be the area to re-initiate shorts. The RBA minutes will be released tomorrow, although we shouldn’t hear too much in the way of new inflation.
The former uptrend drawn from the July low seems to be holding up play, however the pair closed above the top Bollinger band as well and generally this has been a sign that the pair could mean revert. Sterling has clearly become the markets preferred currency in the G10 region and you can see in the weekend Commitment of Traders (CoT) report that gross long positions (held by currency futures traders) increased last week to 85,000 contracts, by far the highest in the G10 currency region. Despite some signs that a modest pullback could materialise traders will be keen to look out for a close above the May 6 high of 1.6998.
10-Year T-Note Decimalised (10-Year bond)
With the FOMC meeting in play this week price action in the fixed income market will be closely watched for triggers for other asset classes, like the USD. It should be a fairly interesting meeting for traders, with the central bank likely to cut the pace of its bond buying program again, while also amending inflation and growth forecasts. Traders will have to react to other data in the lead up to the meeting, with New York manufacturing in play tonight (22:30 AEST) and industrial production, net TIC flows (i.e. the level of buying of US securities) and capacity utilisation out at 23:15 AEST.