The Case For Selling EUR/USD On Any Upticks This Week

Focus of the day:

"Better-than-expected data and Fed Chair Yellen’s recent confirmation of a likely 2015 lift-off have supported the recent rebound in the USD. Data this week should maintain this momentum.

The Fed’s Beige Book (Wednesday) will likely underscore recent USD strength by describing an improving US economy after weather-related Q1 weakness. This should also be supported by Friday’s US labour market report, where we forecast a further 225k gain in headline NFP (consensus: 228k) and another drop in the unemployment rate to 5.3% (consensus: 5.4%). We continue to think USD strength will be underpinned by an economy that is most capable of generating inflation and the closest to rate hikes.

All eyes will stay on Greece in the coming week with the first June payment to the IMF (c.€300mn) due on Friday. Recent headlines have been somewhat conflicting, with sources suggesting that the IMF offered Greece a delay to pay the EUR1.6bn it owes in June, with the possibility to make all payments at once at the end of the month. Even if the 5 June payment is made, we continue to highlight the large divergence in views between the two parties, which should continue to weigh on the EUR, in our view.

Other than Greek political developments, the highlight will likely be Wednesday’s ECB policy meeting and subsequent press conference. In the context of mandate-inconsistent levels of current inflation and inflation expectations, we expect the ECB to reiterate its commitment to its PSPP purchases. Nonetheless, we think the market may have misinterpreted the ECB’s recent statement regarding the frontloading of its asset purchases. We expect President Draghi to clarify this during the press conference, noting that the decision was made on the basis of seasonal liquidity considerations rather than the recent increase in bond yields.

While this may provide upside pressure to the EUR, any strength is unlikely to persist, and we recommend selling EURUSD on any upticks."

This content has been provided under specific arrangement with eFXnews.

Share: Analysis feed

eFXnews is a financial news and information service. Articles and other information distributed in this service and published on this site are provided in general terms and do not take account of or address any individual user's position. To the extent that some of these articles include suggestions as to various possible investment strategies which users might consider, they do so in only general terms without reference to the personal factors which should determine any user's investment decisions to buy or sell a specific security or currency.

The service and the content of this site are provided and distributed on the basis of “AS IS” without warranties of any kind either, express or implied, including without limitations, warranties of title or implied warranties of merchantability or fitness for a particular purpose. eFXnews and its employees, officers, directors, agents, and licensors do not also warrant the accuracy, completeness or timeliness of the information in any of the articles and other information distributed in this service and included on this site, and eFXnews hereby disclaims any such express or implied warranties; and, you hereby acknowledge that use of the service and the content of this site is at you sole risk.

In no event shall eFXnews and its employees, officers, directors, agents, and licensors will be liable to you or any third party or anyone else for any decision made or action taken by you in your reliance on any strategy and/or advice included in any article and other information distributed in this service and published in this site.