29 Apr 2014
EUR/USD up on ECB speakers - Scotiabank
FXStreet (Guatemala) - Camilla Sutton, CFA, CMT, Chief FX Strategist at Scotiabank noted the strength of the Euro.
Key Quotes:
"There were economic releases of significance today; however ECB speakers have continued to focus on the importance of inflation risk and a strong EUR."
"The Bundesbank also repeated that emergency level policy won’t continue forever. The market focused on general rumours of the potential for Russia to move away from USD holdings and towards EUR."
"This week the release of April’s flash CPI, is widely expected to show a jump up to 0.8% on headline and 1.0% on core—largely associated with the timing of Easter. Any disappointment will be met with increased calls on the ECB to take policy action."
"According to President Draghi’s framework if the issue is a stronger EUR tightening monetary conditions than it will be met with conventional methods; however if there is a worsening in the medium‐term outlook for inflation than this will be met with QE. Any risk of QE could be met (counterintuitively) with positive EUR flows as traders preposition for the impact on the bond market."
"We expect EUR’s upside to be limited to the ytd high of 1.3967 and expect it to trend towards 1.30 by year‐end. However until the long positions begin to unwind and as long as capital flows are strong it is too early to position for EUR downside."
"EUR/USD short‐term technicals: bullish—most studies warn of upside risk with some upside momentum. Support lies at the 50‐day MA at 1.3803 and resistance lies at the recent April high of 1.3906."
Key Quotes:
"There were economic releases of significance today; however ECB speakers have continued to focus on the importance of inflation risk and a strong EUR."
"The Bundesbank also repeated that emergency level policy won’t continue forever. The market focused on general rumours of the potential for Russia to move away from USD holdings and towards EUR."
"This week the release of April’s flash CPI, is widely expected to show a jump up to 0.8% on headline and 1.0% on core—largely associated with the timing of Easter. Any disappointment will be met with increased calls on the ECB to take policy action."
"According to President Draghi’s framework if the issue is a stronger EUR tightening monetary conditions than it will be met with conventional methods; however if there is a worsening in the medium‐term outlook for inflation than this will be met with QE. Any risk of QE could be met (counterintuitively) with positive EUR flows as traders preposition for the impact on the bond market."
"We expect EUR’s upside to be limited to the ytd high of 1.3967 and expect it to trend towards 1.30 by year‐end. However until the long positions begin to unwind and as long as capital flows are strong it is too early to position for EUR downside."
"EUR/USD short‐term technicals: bullish—most studies warn of upside risk with some upside momentum. Support lies at the 50‐day MA at 1.3803 and resistance lies at the recent April high of 1.3906."