EUR/USD: Under Moderate Pressure
FBS | Jun 13, 2014 11:37AM ET
During the past week EUR/USD has made a move down towards $1.3510, but managed to stabilize there and recover to $1.3570. There is further resistance at $1.3660 (200-day MA) and $1.3700/40.
Bottom may be at $1.3400 (55-month MA, 200-week MA). The reason for euro to fall lower would appear if the ECB does QE, but we think that the central bank will take a time out to see how the economy’s reacting.
In Europe we had stronger than expected industrial production, but it’s not enough to change the ECB’s position on easing. Next week the most important release will be German ZEW Economic Sentiment – the indicator has been declining for 5 months in a row.
Data from America remains mixed. US retail sales growth slowed last month. It means that consumer spending is weak especially considering the improvement in the labor market (solid NFP above 200K). Focus will be on the Fed’s meeting and press conference on Wednesday, June 18. On the one hand, the Fed will keep avoiding the rate hike talk and stick to the intention to leave monetary policy unchanged for a long time. But on the other hand, it will continue slowly but surely tapering QE. Still, this is what the market expects and we don’t think that the FOMC will be a great market mover this time.
It’s good to trade euro in crosses: EUR/AUD, EUR/NZD as Australian and New Zealand’s dollars offer higher yields that contrasts with the negative deposit rates in the euro area. There’s room for more declines after some correction.
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