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12 Nov 2014
EUR indicators remain bearish- Scotiabank
FXStreet (Guatemala) - Currency Strategists, Camilla Sutton and Eric Theoret noted the conditions that have been surrounding the Euro in Europe as we now move through the US shift.
Key Quotes:
"Fundamental releases were mixed, with Eurozone industrial production increasing just 0.6%m/m but with a positive revision to last month; and a soft German wholesale price index, -0.6%m/m or –0.7%y/y".
"ECB member Mersch suggested that as the ECB has reached the lower bound, it is ready to begin ABS purchases next week and has the option on sovereign purchases should the backdrop deteriorate. As the ECB has begun its covered bond purchases, buying as of November 7th just €7.4bn, it has failed to compensate for the other impacts on the ECB’s balance sheet which has narrowed from €2.05trn on October 31st to €2.03trn as of November 7th”.
“Together this highlights the hurdles the ECB faces with ongoing pressures that are narrowing the balance sheet juxtaposed against a relatively small pool of assets to purchase”.
“We expect EUR to trend lower, but at a mo re moderate pace, holding a year-end target of 1.21 and a 2016 year-end target of 1.17.
EUR/USD short-term technicals: bearish—bias to further downside, as both trend and momentum indicators are bearish.
“Downside risk is somewhat offset by positive divergence as momentum indicators have failed to confirm the recent lows in spot."
Key Quotes:
"Fundamental releases were mixed, with Eurozone industrial production increasing just 0.6%m/m but with a positive revision to last month; and a soft German wholesale price index, -0.6%m/m or –0.7%y/y".
"ECB member Mersch suggested that as the ECB has reached the lower bound, it is ready to begin ABS purchases next week and has the option on sovereign purchases should the backdrop deteriorate. As the ECB has begun its covered bond purchases, buying as of November 7th just €7.4bn, it has failed to compensate for the other impacts on the ECB’s balance sheet which has narrowed from €2.05trn on October 31st to €2.03trn as of November 7th”.
“Together this highlights the hurdles the ECB faces with ongoing pressures that are narrowing the balance sheet juxtaposed against a relatively small pool of assets to purchase”.
“We expect EUR to trend lower, but at a mo re moderate pace, holding a year-end target of 1.21 and a 2016 year-end target of 1.17.
EUR/USD short-term technicals: bearish—bias to further downside, as both trend and momentum indicators are bearish.
“Downside risk is somewhat offset by positive divergence as momentum indicators have failed to confirm the recent lows in spot."