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8 Dec 2014
EUR breaks to 2‐yr lows on soft German data – Scotiabank
FXStreet (Barcelona) - Camilla Sutton CFA, CMT, Chief FX Strategist at Scotiabank, notes that EUR has fallen to fresh 2‐year lows, weighed down by a disappointing German industrial production release.
Key Quotes
“EUR has fallen to fresh 2‐year lows, weighed down by a disappointing German industrial production release which showed growth of just 0.2%m/m and 0.8%y/y, S&P’s decision to downgrade Italy to BBB‐/stable, and a strong USD. S&P’s decision to downgrade Italy came on the back of a downward revision to growth, which undermine public debt dynamics.
“The focus for markets has shifted to the Thursday, where the allotment to the ECB’s TLTRO will be the highlight. The first TLTRO was disappointing, with only €83bn allotted; consensus appears to be calling for a larger allocation of €170bn. This is an important driver of the ECB’s balance sheet. Any disappointment will add to speculation that the ECB will move towards a large sovereign debt buying program, likely over €500bn in early 2015.”
“We expect EUR to trend lower in 2015, holding a year‐end 1.18 target.”
“EURUSD short‐term technicals: bearish—with most studies warning of downside risk; however there are clear warnings on the EUR chart, including divergence between spot and the MACD. Support lies at 1.2200 and resistance comes in at Friday’s open of 1.2379.”
Key Quotes
“EUR has fallen to fresh 2‐year lows, weighed down by a disappointing German industrial production release which showed growth of just 0.2%m/m and 0.8%y/y, S&P’s decision to downgrade Italy to BBB‐/stable, and a strong USD. S&P’s decision to downgrade Italy came on the back of a downward revision to growth, which undermine public debt dynamics.
“The focus for markets has shifted to the Thursday, where the allotment to the ECB’s TLTRO will be the highlight. The first TLTRO was disappointing, with only €83bn allotted; consensus appears to be calling for a larger allocation of €170bn. This is an important driver of the ECB’s balance sheet. Any disappointment will add to speculation that the ECB will move towards a large sovereign debt buying program, likely over €500bn in early 2015.”
“We expect EUR to trend lower in 2015, holding a year‐end 1.18 target.”
“EURUSD short‐term technicals: bearish—with most studies warning of downside risk; however there are clear warnings on the EUR chart, including divergence between spot and the MACD. Support lies at 1.2200 and resistance comes in at Friday’s open of 1.2379.”