Back
11 Jun 2014
Weakness in EUR to persist - Scotiabank
FXStreet (Bali) - Camilla Sutton, CFA, CMT, Chief FX Strategist at Scotiabank, supports a weakening EUR over the coming weeks.
Key Quotes
"Expected weekly range was : 1.3586 to 1.3677, having broken to the downside it suggest a bearish shift. See table. Important levels from here: 1.3477 and 1.3374."
"EUR is weak, breaking through several layers of support, making an attempt at last Thursday’s ECB induced low of 1.3503. Technically, downside momentum is building; fundamentally today’s downside lacks a fresh catalyst, which suggests that flows are reversing out of EUR positions."
"EUR is moving lower in tandem with the GE‐US 2 year bond yield spread, which suggest the catalyst is fundamentally based, and likely on the back of last week’s ECB decision. However, the option market is not moving in tandem, with risk reversals shifting higher, suggesting a building desire to protect against EUR upside—see chart."
"Taken together, the combination of low growth, low inflation, ECB policy and shifting sentiment should all support a weakening in EUR. A break below 1.3500 would be significant and open up a test down to the February lows of 1.3477 followed by 1.3374, the 50% Fibo retracement of the July to May rally. We hold a year‐end target of 1.30."
Key Quotes
"Expected weekly range was : 1.3586 to 1.3677, having broken to the downside it suggest a bearish shift. See table. Important levels from here: 1.3477 and 1.3374."
"EUR is weak, breaking through several layers of support, making an attempt at last Thursday’s ECB induced low of 1.3503. Technically, downside momentum is building; fundamentally today’s downside lacks a fresh catalyst, which suggests that flows are reversing out of EUR positions."
"EUR is moving lower in tandem with the GE‐US 2 year bond yield spread, which suggest the catalyst is fundamentally based, and likely on the back of last week’s ECB decision. However, the option market is not moving in tandem, with risk reversals shifting higher, suggesting a building desire to protect against EUR upside—see chart."
"Taken together, the combination of low growth, low inflation, ECB policy and shifting sentiment should all support a weakening in EUR. A break below 1.3500 would be significant and open up a test down to the February lows of 1.3477 followed by 1.3374, the 50% Fibo retracement of the July to May rally. We hold a year‐end target of 1.30."