5 Jan 2015
EUR weak, may test 1.1640 levels – Scotiabank
FXStreet (Barcelona) - Camilla Sutton CFA, CMT, Chief FX Strategist at Scotiabank, notes that the EUR fall to 1.1864 levels through the key supports at 1.2043 and 1.1877 has opened the possibility for a potential test of the 2005 low at 1.1640.
Key Quotes
“EUR is weak, down 0.8% since Friday’s close and 1.6% ytd, bringing the currency to levels not seen since April 2006, or a 9‐year low. The currency has broken violently below 1.20, briefly touching 1.1864, on the Asian open.”
“Key support levels of 1.2043 (the 2012 low) and 1.1877 (the 2010 low) have been broken, opening a potential test down to the 2005 low of 1.1640. Historically, major period of EUR weakness have been relatively rapid and have equated to 20% losses. The current collapse began in May 2014 at 1.3993, and has to date seen a 15% drop. A fall in line with historical periods of 20% would see EUR fall a further 5% to 1.12.”
“All EUR drivers are uniting against the currency, but today’s weakness was driven by Chancellor Merkel comments that a Greek exit would not threaten the existence of the Eurozone, suggesting that Germany would do little to prevent a Greek exit.”
“Accordingly, the combination of political uncertainty, weak domestic data, CPI which is expected to fall from disinflation into deflation this month, and a dovish central bank have combined to drive large EUR outflows and building negative sentiment. We expect this trend to continue and warn that it is too early to attempt to pick a bottom.“
“EURUSD short‐term technicals: bearish—all signals warn of ongoing downside risk. The RSI is at just 26, leaving room before it reaches oversold levels at 20; a close below the 2010 low of 1.1877 would open up further near‐term selling risk.”
Key Quotes
“EUR is weak, down 0.8% since Friday’s close and 1.6% ytd, bringing the currency to levels not seen since April 2006, or a 9‐year low. The currency has broken violently below 1.20, briefly touching 1.1864, on the Asian open.”
“Key support levels of 1.2043 (the 2012 low) and 1.1877 (the 2010 low) have been broken, opening a potential test down to the 2005 low of 1.1640. Historically, major period of EUR weakness have been relatively rapid and have equated to 20% losses. The current collapse began in May 2014 at 1.3993, and has to date seen a 15% drop. A fall in line with historical periods of 20% would see EUR fall a further 5% to 1.12.”
“All EUR drivers are uniting against the currency, but today’s weakness was driven by Chancellor Merkel comments that a Greek exit would not threaten the existence of the Eurozone, suggesting that Germany would do little to prevent a Greek exit.”
“Accordingly, the combination of political uncertainty, weak domestic data, CPI which is expected to fall from disinflation into deflation this month, and a dovish central bank have combined to drive large EUR outflows and building negative sentiment. We expect this trend to continue and warn that it is too early to attempt to pick a bottom.“
“EURUSD short‐term technicals: bearish—all signals warn of ongoing downside risk. The RSI is at just 26, leaving room before it reaches oversold levels at 20; a close below the 2010 low of 1.1877 would open up further near‐term selling risk.”