TV

John J Hardy
Eurozone and German PMIs both better than expected, data from France a little disappointing but overall it's good news for the Euro.
Trade view / 14 February 2013 at 8:13 GMT

Selling EURUSD after Draghi, ugly Euro growth data

John J Hardy John J Hardy
Head of FX Strategy / Saxo Bank
Denmark

EURUSD is on the defensive once again as France and Germany both reported worse than expected growth figures and after key technical support gave way.

Trade: Shorting EURUSD in 1.3380-1.3405 area
Stop: 1.3442 bid
Targets: 1.3290 and 1.3155

Arguments in favour of shorting EURUSD

  • The strong Euro is clearly hurting the Euro Zone economy. The ECB strategy thus far has only succeeded in protecting sovereign debt and the banking system and not provided any stimulus to the economy. The next phase will either see renewed tail risks over political disagreement over what to do next and how/whether to use the ECB’s powers to print money or we will see anticipation of a country, perhaps even France, asking for an official bailout in order to access the OMT facility, which could finally see a renewed expansion of the ECB's balance sheet.
  • Specifically, the ECB’s Draghi was out saying yesterday that the strong Euro is hurting the peripheral countries’ economies and this morning we had negative GDP reports from both France and Germany for Q4 this morning (-0.3% and -0.6% QoQ, respectively) and this could generate additional political heat on the question of the strong Euro
  • Technically, yesterday’s attempt through 1.3500 was roundly rejected and this morning’s follow through took out the important 1.3428 area that was important on the way up, so the implication is that the downside remains the side of least resistance in the near term as long as that resistance area holds.

Trade Management: If the pair trades through 1.3330, stops can be lowered to just above 1.3400 and if the pair trades through the first target, stops can be brought down to perhaps 1.3355 bid. The second target is just ahead of a 100% extension of the recent sell-off

Risk: we have a G20 meeting today and tomorrow that could produce statements surrounding Japan’s recent behaviour that could push the JPY back to the weak side if the statement is not seen as particularly forceful or providing a brake to Japan’s determination to weaken its currency. This could push EURJPY higher and affect other major Euro crosses as well.

Chart: EURUSD hourly

EURUSD_h

Chart: EURUSD

EURUSD_s

Chart: EURUSD longer term

EURUSD_l

 

Disclaimer:
Non-independent investment research
This investment research has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Saxo Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. 
» Read more

Disclaimer

The Saxo Bank Group provides an execution-only service and all information provided on Tradingfloor.com is solely for general information. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. Saxo Bank Group will not be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available as part of the Tradingfloor.com or as a result of the use of the Tradingfloor.com. Any information which could be construed as investment research has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such should be considered as a marketing communication. Furthermore it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Please read our disclaimers:
- Notification on Non-Independent Investment Research
- Full disclaimer

Show latest activity
Dismiss
Sorry, there was a problem communicating with the TradingFloor.com servers. We are working hard to solve this. Please try again later.
Oops! There was a problem communicating with the OpenAPI Portfolio service.
Oops! There was a problem communicating with the OpenAPI History service.
Oops! There was a problem communicating with the OpenAPI Reference service.
Oops! There was a problem communicating with the OpenAPI Root service.
Oops! There was a problem communicating with the OpenAPI Trading service.
Sorry, there was a problem communicating with the Financial Calender servers. We are working hard to solve this. Please try again later.
Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail