12 May 2014
EUR/USD turning point? – Danske Bank
FXStreet (Edinburgh) - Anders Fishcher, Analyst at Danske Bank, underlines the recent sharp sell-off in the EUR/USD.
Key Quotes
“Draghi’s ‘promise’ of further ECB easing in June could very well be the turning point for EUR/USD and the cross continued its downturn Friday and dropped below 1.38, as the market increasingly seems to buy into Draghi’s promise”.
“Today, the series of speeches from ECB members might have a market impact as they will be scrutinised for confirmation that the ECB will actually ease in June”.
“According to the latest IMM data, speculative investors bought EUR and sold USD ahead of the ECB meeting last week. Overall, speculative accounts remain net long EUR and net short USD, which leaves plenty of space for further downside in the cross from a positioning point of view”.
“However, we should be aware that supportive factors like the euro-zone’s current account surplus, the flow into peripheral bond markets and the positive European data surprises are still in place”.
“Moreover, our short-term financial model also indicates that last week’s decline in EUR/USD might be a bit overdone – albeit not significantly stretched. Currently EUR/USD trades around 1 standard deviation below the model’s fair value estimate of 1.388”.
Key Quotes
“Draghi’s ‘promise’ of further ECB easing in June could very well be the turning point for EUR/USD and the cross continued its downturn Friday and dropped below 1.38, as the market increasingly seems to buy into Draghi’s promise”.
“Today, the series of speeches from ECB members might have a market impact as they will be scrutinised for confirmation that the ECB will actually ease in June”.
“According to the latest IMM data, speculative investors bought EUR and sold USD ahead of the ECB meeting last week. Overall, speculative accounts remain net long EUR and net short USD, which leaves plenty of space for further downside in the cross from a positioning point of view”.
“However, we should be aware that supportive factors like the euro-zone’s current account surplus, the flow into peripheral bond markets and the positive European data surprises are still in place”.
“Moreover, our short-term financial model also indicates that last week’s decline in EUR/USD might be a bit overdone – albeit not significantly stretched. Currently EUR/USD trades around 1 standard deviation below the model’s fair value estimate of 1.388”.