12 May 2015
Current EUR strength an opportunity for bears – RBS
FXStreet (Barcelona) - Greg Gibbs, FX Trading Strategist at RBS, notes that the current EUR/USD strength gives a good opportunity for building a medium-term short position in anticipation of USD strength in H2, 2015.
Key Quotes
“The performance of the USD was solid in light of the weaker than expected US labour data. The outcome is probably neutral for Fed policy, it tends to support the notion of transitory factors slowing growth in Q1, setting up for a better spring.”
“There was some evidence of further progress in a reducing the slack in the labour market (slightly lower unemployment and firmer participation), but not so much to put much upward pressure on wages yet.”
“EUR spiked briefly on the data, but ended the week around its lows. Stability returning to European bond markets appears to have taken away some upside pressure on EUR. The outlook near term is looking more balanced, and the risk may be swinging back to downside in the EUR.”
“According to the IMM futures speculative positioning data, as at Tuesday last week, traders were still significantly short EUR/USD. As such, there may still be a lack of power to drive EUR lower and risk of short covering rallies remain. However, this positioning data did not incorporate the late-week rise in EUR through 1.13, and we presume the market has squared up a bit further.”
“In the end, EUR remained little changed last week settling near 1.12 and we expect some support on dips back to the mid-1.10s; likely to be viewed as the bottom of the current range.”
“Taking a more medium term view, current levels are a decent place to establish a short position anticipating strength in the USD and US rate hikes towards the second half of the year.”
Key Quotes
“The performance of the USD was solid in light of the weaker than expected US labour data. The outcome is probably neutral for Fed policy, it tends to support the notion of transitory factors slowing growth in Q1, setting up for a better spring.”
“There was some evidence of further progress in a reducing the slack in the labour market (slightly lower unemployment and firmer participation), but not so much to put much upward pressure on wages yet.”
“EUR spiked briefly on the data, but ended the week around its lows. Stability returning to European bond markets appears to have taken away some upside pressure on EUR. The outlook near term is looking more balanced, and the risk may be swinging back to downside in the EUR.”
“According to the IMM futures speculative positioning data, as at Tuesday last week, traders were still significantly short EUR/USD. As such, there may still be a lack of power to drive EUR lower and risk of short covering rallies remain. However, this positioning data did not incorporate the late-week rise in EUR through 1.13, and we presume the market has squared up a bit further.”
“In the end, EUR remained little changed last week settling near 1.12 and we expect some support on dips back to the mid-1.10s; likely to be viewed as the bottom of the current range.”
“Taking a more medium term view, current levels are a decent place to establish a short position anticipating strength in the USD and US rate hikes towards the second half of the year.”