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22 May 2014
EUR/USD conditions, supported at 200DMA - Scotiabank
FXStreet (Guatemala) - Camilla Sutton, CFA, CMT, Chief FX Strategist at Scotiabank noted that EUR is soft but is struggling to make a sustained drop lower. To date, the 200-day MA at 1.3636 has provided firm support.
Key Quotes
"Today’s PMI data (see chart) was encouraging from a broad level, but the trend in prices and France are a growing concern and highlight the ECB’s dilemma well. Our summary:"
"1. Eurozone PMI continues to highlight expansion; with the composite coming in as expected at 53.9 and essentially flat to last month’s 54; manufacturing was vaguely weaker than expected but still in expansionary territory at 52.5; while services was stronger than expected at 53.9. Overall, this is the best quarter in three years suggesting that growth dynamics are encouraging; however the releases were well off the January highs."
"2. Output prices fell for the 26th month, with particular softness in services; however farther down the pipeline input costs rose. This disinflationary environment juxtaposed against expansion highlights the complication for the ECB well."
"3. Employment growth is expanding, which is also encouraging. "
"4. Germany is strong, with the composite rising to 56.1 (though manu was softer than expected and services were stronger); the non-core was also relatively strong; however France continues to diverge, with both services and manufacturing surprising markets by falling into contraction at 49.2 and 49.3, respectively. The PMI does not change our core view that the ECB will act on interest rates at the June 5th meeting and that EUR will trend lower into year-end."
"EUR/USD short‐term technicals: bearish—all studies warn of further downside, with a near-term break below the 200-day MA at 1.3636 increasingly likely. We favour holding EUR from the short side."
Key Quotes
"Today’s PMI data (see chart) was encouraging from a broad level, but the trend in prices and France are a growing concern and highlight the ECB’s dilemma well. Our summary:"
"1. Eurozone PMI continues to highlight expansion; with the composite coming in as expected at 53.9 and essentially flat to last month’s 54; manufacturing was vaguely weaker than expected but still in expansionary territory at 52.5; while services was stronger than expected at 53.9. Overall, this is the best quarter in three years suggesting that growth dynamics are encouraging; however the releases were well off the January highs."
"2. Output prices fell for the 26th month, with particular softness in services; however farther down the pipeline input costs rose. This disinflationary environment juxtaposed against expansion highlights the complication for the ECB well."
"3. Employment growth is expanding, which is also encouraging. "
"4. Germany is strong, with the composite rising to 56.1 (though manu was softer than expected and services were stronger); the non-core was also relatively strong; however France continues to diverge, with both services and manufacturing surprising markets by falling into contraction at 49.2 and 49.3, respectively. The PMI does not change our core view that the ECB will act on interest rates at the June 5th meeting and that EUR will trend lower into year-end."
"EUR/USD short‐term technicals: bearish—all studies warn of further downside, with a near-term break below the 200-day MA at 1.3636 increasingly likely. We favour holding EUR from the short side."