23 May 2014
A weaker EUR raising eyebrows - Scotiabank
FXStreet (Guatemala) - Camilla Sutton, CFA, CMT, Chief FX Strategist at Scotiabank noted that "EUR is weak, having broken to a multi-month low and flirting with a break of 1.3600.
Key Quotes
“Today’s releases were the catalyst for the drop, as German IFO (business sentiment) eased and the detailed GDP breakdown revealed softer than expected exports; meanwhile retail sales in Italy were miserable while hourly wages were flat m/m (again)."
"Fundamentals have long been EUR negative, but flows (central bank balance sheets, FX reserves, investor positioning, etc) have helped to offset the negative fundamentals. There are early signs that these flows are also abating, leaving EUR vulnerable. The release of the flash CPI on June 3rd is the hurdle left—any sign of further disinflation will increase the risk of more powerful action from the ECB."
"This weekend, the ECB holds its ECB Forum on Central Banks, which could provide plenty of sideline comments as well as a speech by President Draghi. While the European elections (May 22-25) are being treated by markets as a non-event. On a more optimistic note, S&P raised Spain’s credit rating to BBB; while Fitch increased Greece’s to B."
"EUR/USD short‐term technicals: bearish—all technical studies warn of further downside and with the RSI at just 29 it leaves plenty of room before reaching oversold levels. The upward EUR trend has been broken; the next major level of support lies at 1.3520, the 38% Fibo retracement of the July to May rally; with the 50% retracement down at 1.3374 (see chart). We favour short EUR positions for near and medium
Key Quotes
“Today’s releases were the catalyst for the drop, as German IFO (business sentiment) eased and the detailed GDP breakdown revealed softer than expected exports; meanwhile retail sales in Italy were miserable while hourly wages were flat m/m (again)."
"Fundamentals have long been EUR negative, but flows (central bank balance sheets, FX reserves, investor positioning, etc) have helped to offset the negative fundamentals. There are early signs that these flows are also abating, leaving EUR vulnerable. The release of the flash CPI on June 3rd is the hurdle left—any sign of further disinflation will increase the risk of more powerful action from the ECB."
"This weekend, the ECB holds its ECB Forum on Central Banks, which could provide plenty of sideline comments as well as a speech by President Draghi. While the European elections (May 22-25) are being treated by markets as a non-event. On a more optimistic note, S&P raised Spain’s credit rating to BBB; while Fitch increased Greece’s to B."
"EUR/USD short‐term technicals: bearish—all technical studies warn of further downside and with the RSI at just 29 it leaves plenty of room before reaching oversold levels. The upward EUR trend has been broken; the next major level of support lies at 1.3520, the 38% Fibo retracement of the July to May rally; with the 50% retracement down at 1.3374 (see chart). We favour short EUR positions for near and medium