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15 Apr 2015
EUR/USD: Macro, model, technicals - Westpac
FXStreet (Bali) - The Westpac FX Strategy Team shares their view on the EUR from a macro, model and technical perspective.
Key Quotes
Macro: EUR remains torn by on the one hand ECB QE and on the other the relentless run of softer US data. We had been of the view that EUR would establish a beach-head above 1.10 in the weeks ahead but EUR's price action post the soft NFP report has been woeful. Perhaps the Shell/ BG M&A is a factor that is capping EUR in the near term? There's no doubt market participants are looking beyond a soft Q1 for the US too and hopeful of better growth in Q2. By our reckoning about half the slowdown is due to one time negatives (port congestion and weather) while the balance is a function of more enduring forces like a strong USD. Early Q2 data should thus show a good bounce but one that may well fall short of hopes.
Model: The model cools on EUR after running with a modest longs in recent weeks, trimming its exposure to a negligible +4.7% as bund outperformance in the last week weighs on our EUR total yield signal and last week’s soft EZ retail sales data weighs on our Eurozone growth signal.
Technical: Break below the 61.8% retrace at 1.0685 negated the recent upswing. New lows in 2015 have lacked momentum backing, hence we expect a further decline to be slow and steady.
Key Quotes
Macro: EUR remains torn by on the one hand ECB QE and on the other the relentless run of softer US data. We had been of the view that EUR would establish a beach-head above 1.10 in the weeks ahead but EUR's price action post the soft NFP report has been woeful. Perhaps the Shell/ BG M&A is a factor that is capping EUR in the near term? There's no doubt market participants are looking beyond a soft Q1 for the US too and hopeful of better growth in Q2. By our reckoning about half the slowdown is due to one time negatives (port congestion and weather) while the balance is a function of more enduring forces like a strong USD. Early Q2 data should thus show a good bounce but one that may well fall short of hopes.
Model: The model cools on EUR after running with a modest longs in recent weeks, trimming its exposure to a negligible +4.7% as bund outperformance in the last week weighs on our EUR total yield signal and last week’s soft EZ retail sales data weighs on our Eurozone growth signal.
Technical: Break below the 61.8% retrace at 1.0685 negated the recent upswing. New lows in 2015 have lacked momentum backing, hence we expect a further decline to be slow and steady.