26 Jan 2015
EUR/USD bounce may hinge on Fed – TDS
FXStreet (Barcelona) - According to Shaun Osborne, Chief FX Strategist, at TD Securities, looking at the one sided positioning and the recent drop in lower, the EUR/USD pair risks an upside bounce in the short run, which may hinge on the FOMC meeting this week.
Key Quotes
“We remain bearish on the outlook for the EUR overall but we remain cognizant of the risk that positioning (IMM data released at the end of last week highlight just how one-sided—even before the bulk of the latest drop—the market has become positioned), plus the scale of the move lower in spot over the past three months or so might limit scope for an immediate or significant extension of last week’s slide.”
“Indeed, these issues could actually point to the risk of a trading bounce in the single currency in the short run. That may hinge on the FOMC meeting this week; if the Fed stays on positive message, and ignores the USD—which we think it can—EURUSD is likely to remain heavy.”
“US Treasury Sec. Lew, who is entitled to have a beef with the USD if he feels like it, suggested that USD strength was fundamentally justified when speaking in Davos Friday. No push back there. But a cautious-sounding Fed could check the USD’s advance and prompt a modest bounce in the EUR potentially.”
“From a technical point of view, that fact that the EUR has steadied around major, long-term support (1.1214 is the 61.8% retracement support of the 0.83/1.60 rally) warrants attention. Holding this level last week gives some legitimacy to the idea that the EUR sell off may stop or reverse, if only briefly; a weekly close below opens the door to par.”
Key Quotes
“We remain bearish on the outlook for the EUR overall but we remain cognizant of the risk that positioning (IMM data released at the end of last week highlight just how one-sided—even before the bulk of the latest drop—the market has become positioned), plus the scale of the move lower in spot over the past three months or so might limit scope for an immediate or significant extension of last week’s slide.”
“Indeed, these issues could actually point to the risk of a trading bounce in the single currency in the short run. That may hinge on the FOMC meeting this week; if the Fed stays on positive message, and ignores the USD—which we think it can—EURUSD is likely to remain heavy.”
“US Treasury Sec. Lew, who is entitled to have a beef with the USD if he feels like it, suggested that USD strength was fundamentally justified when speaking in Davos Friday. No push back there. But a cautious-sounding Fed could check the USD’s advance and prompt a modest bounce in the EUR potentially.”
“From a technical point of view, that fact that the EUR has steadied around major, long-term support (1.1214 is the 61.8% retracement support of the 0.83/1.60 rally) warrants attention. Holding this level last week gives some legitimacy to the idea that the EUR sell off may stop or reverse, if only briefly; a weekly close below opens the door to par.”