8 Nov 2013
Flash: Short EUR/USD, target 1.3000 - Westpac
FXstreet.com (Barcelona) - A depressed CPI print in October coupled with the ECB's rate cut by 25bp today, reinforces the case for a material shift in the euro's fortunes, notes Richard Franulovich, Strategist at Westpac.
Key Quotes
"The currency has already shed US5 cents from its highs yet at current levels (1.3390) it does not seem overdone on the downside. EUR still remains well above its 200 day moving average for example (currently 1.3220). All the risks would seem to be skewed then toward more trend EUR weakness, certainly that is what our proprietary indicators are suggesting."
"From here the ECB still has some more policy options at its disposal - long term refinancing operations, strengthening of forward guidance and cutting the deposit rate into negative territory, to name a few. However, another move as soon as December would appear to be very unlikely. That said, today's decision reinforces the impression of an ECB that is much more proactive and pragmatic under Draghi's leadership. That they are prepared to defend their price stability mandate on both sides is also illuminating, a development that has negative long term consequences for the euro."
"Taking all these developments together and given the ongoing bearish slant from our stable of model signals we have added a short EUR position to our ForeXfocus portfolio, initiated at 1.3380. We will add to the position at 1.3495 and exit the position if euro trades through 1.3570. Our target on the downside will be 1.3000."
Key Quotes
"The currency has already shed US5 cents from its highs yet at current levels (1.3390) it does not seem overdone on the downside. EUR still remains well above its 200 day moving average for example (currently 1.3220). All the risks would seem to be skewed then toward more trend EUR weakness, certainly that is what our proprietary indicators are suggesting."
"From here the ECB still has some more policy options at its disposal - long term refinancing operations, strengthening of forward guidance and cutting the deposit rate into negative territory, to name a few. However, another move as soon as December would appear to be very unlikely. That said, today's decision reinforces the impression of an ECB that is much more proactive and pragmatic under Draghi's leadership. That they are prepared to defend their price stability mandate on both sides is also illuminating, a development that has negative long term consequences for the euro."
"Taking all these developments together and given the ongoing bearish slant from our stable of model signals we have added a short EUR position to our ForeXfocus portfolio, initiated at 1.3380. We will add to the position at 1.3495 and exit the position if euro trades through 1.3570. Our target on the downside will be 1.3000."