Risk for EUR is downside - Scotiabank

FXStreet (Córdoba) - EUR continues to trade in its relatively stable range, either side of 1.37 and comfortably between the 100 and 200‐day MA (1.3739 and 1.3632, respectively) but risks remain on the downside, notes Camilla Sutton, analyst at Scotiabank.

Key Quotes

“A slew of ECB members have confirmed what the market is already pricing in, policy action in June. Bloomberg is reporting that the ECB is considering a change in its policy meeting schedule, pushing them out to every six week, as a way to allow a more timely release of meeting minutes”.

“In terms of the near‐term outlook for EUR it continues to worsen. Last Friday, the CFTC positioning data saw the market shift to a net short position,, risk reversals are suggesting some increased desire to protect against EUR downside and periphery yields continue to shift off their lows (suggesting asset allocations are shifting away from these higher yielding bond markets). Accordingly, the near‐term and medium term risk for EUR is downside. We hold a year‐end target of 1.30”.

“EUR/USD short‐term technicals: bearish as all signals warn of downside risk and the RSI at just 37 leaves plenty of downside room before oversold levels are reached. The next level of support is the 200‐day MA at 1.3632, followed by the psychological 1.3600”.