Tim Riddell, Research Analyst at Westpac, suggests that relatively market benign response to US elections could see EUR rebound.
“EZ industrial production (IP) has declined over the past year. Last week the ECB finally warned that the moderation might be more than just a reaction to 2017’s strength.”
“ZEW expectations turned before the slide in IP and the chart shows that they tend to lead by 4-6 months, suggesting weakness into 2019. EUR/USD rebounds may therefore reflect an unwinding of USD longs, unless there is a material lift in EZ activity.”
“The 1.18 area should cap EUR/USD before it slides back to recent lows. Look to enter opportunistic EUR longs at 1.1440 (stops at 1.1375) to then close and reverse at 1.1800.”
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