EUR can trade to 1.14-1.15 near term - Westpac

Richard Franulovich, Chief Currency Strategist at Westpac, suggests that the recent EURUSD’s breakout higher through 1.11 appears to have been thwarted, the reversal having all the short term technical hallmarks of being a key near term high.

Key Quotes

“But short term Bund-Tsy spreads are still trending in EUR’s favour and without a material repricing in Fed hikes, EUR is unlikely to run away to the downside. Soft Q2 US growth deals a nearly fatal blow to Sep tightening expectations (currently around 20%). EUR growth hardly sets the world alight either and ECB staff are sure to revise prospects lower in Sep. But the negative Q2 US growth surprise, along with downward revisions showing just 1% average growth in the last 3 qtrs, will prove the bigger theme.

EUR can trade to 1.14-1.15 near term. We are wrong through 1.1100, EUR/USD’s base just ahead of the release of the tepid US advance Q2 GP report.

A less upbeat USD outlook as last week’s soft US GDP deals a heavy blow to Sep FOMC tightening chances should see USD/CHF extend to new lows near term. USD/CHF can see 0.94-0.95 before some stability.”