23 Dec 2014
EUR pressured by spreads – TDS
FXStreet (Barcelona) - According to the TD Securities Team, the EUR/USD pair continues to slide low in spite of holiday markets, pressurised by the widening spreads between US and EZ bonds, led by rising US short-term bonds.
Key Quotes
“Holiday markets persist but that did or could not stop the EUR from sliding to a new low for the year—just above 1.22. EURUSD is pressuring a major zone of support on the medium/long-term charts between 1.21/1.22; we think a break is more or less a given, with the EUR likely to retest the 2012 EZ crisis low shortly. A sustained move below this band of support in the next few weeks will add compelling evidence in support of the view that the EUR’s slide is likely to extend deeper into 2015.”
“Higher US short-term rates are driving spreads against EURUSD; the 2-year spread over core EZ bonds has widened out to 79bps, the biggest yield pick up for the USD since 2007; against the backdrop of rising expectations of more ECB easing and the prospect of the Fed getting closer to tightening policy in 2015 as the economy continues to strengthen (watch today’s Q# GDP revisions), there appears little prospect of EURUSD rebounding; rather, the outlook for even more weakness in the EUR looks compelling.”
Key Quotes
“Holiday markets persist but that did or could not stop the EUR from sliding to a new low for the year—just above 1.22. EURUSD is pressuring a major zone of support on the medium/long-term charts between 1.21/1.22; we think a break is more or less a given, with the EUR likely to retest the 2012 EZ crisis low shortly. A sustained move below this band of support in the next few weeks will add compelling evidence in support of the view that the EUR’s slide is likely to extend deeper into 2015.”
“Higher US short-term rates are driving spreads against EURUSD; the 2-year spread over core EZ bonds has widened out to 79bps, the biggest yield pick up for the USD since 2007; against the backdrop of rising expectations of more ECB easing and the prospect of the Fed getting closer to tightening policy in 2015 as the economy continues to strengthen (watch today’s Q# GDP revisions), there appears little prospect of EURUSD rebounding; rather, the outlook for even more weakness in the EUR looks compelling.”