EUR/USD Loses Ground – Where Next?

The euro has surrendered to the strength of the US dollar. EUR/USD is slipping under 1.19. What’s next?

Here is their view, courtesy of eFXnews:

EUR/USD: Still In The Bottom Half Of 1-1.25 & Valuation Still Matters – SocGen

Societe Generale Cross Asset Strategy Research notes that EUR/USD is still stubborn as the Treasury sell-off has lost momentum ahead of US CPI/retail sales this week.

“The euro has bounced from very cheap to cheap, and the valuation matters. We’re still in the bottom half of a 1-1.25 range even if we’ve rise too fast,” SocGen argues. 

“The ECB needs the Fed to push on with balance sheet reduction, and then get some done without the world ending, if they’re going to be able to taper. Escaping QE-infinity and the low rate trap requires all the big CBs to go for it (more, faster) before the global cycle loses momentum,” SocGen adds.

EUR/USD: A Setup For An Ideal Short – SEB

SEB FX Strategy Research argues that much of the recent euro upturn is driven by a weaker dollar and weaker Fed expectations.

“Speculative flows are near record-long EUR/USD, while there is little to suggest that long-term structural flows have been kick-started already. Expectations about the Fed are very muted (1 hike over the coming 18 months) and SEB expects another 4 rate hikes until end-2018,” SEB adds.

“We would use levels above 1.21 to initiate a short EUR/USD trade as we expect EUR/USD to decline towards 1.17 in 3-6 months,” SEB advises.

EUR/USD: Triple Negative Divergence; A Close Below 55d MA Key – Citi

CitiFX Technical Strategy Research notes that EUR/USD charts suggest a triple negative divergence which reflects a weakness in the uptrend at least in the short term.

“Trendline support or channel base is at 1.1754.

We would need to see a close below there and below the 55 day moving average (currently at 1.1704) before confirming any bearish break but the very near term risk is to see a pullback,” Citi adds.