BNP Paribas: Short EUR/USD at 1.1450 for 1.08

  • We enter short EURUSD at 1.1450 targeting a decline to 1.0800. A stop-loss is placed at 1.1620.
  • This follows our conditional short EURUSD trade recommendation initiated on 29 January.

In EURUSD: to parity next year we initiated a conditional trade to enter short
EURUSD at 1.1450. Bearish EURUSD is a core view for us in 2015, but last week
we were cautious entering a short position with the pair appearing vulnerable to a
squeeze higher. Now that 1.1450 has been reached we enter a short trade
targeting 1.0800 and place the stop-loss at 1.1620 (a 1.5% potential loss).

Going forward we view there to be several key factors leading to a weaker
EURUSD (last week we also revised lower our EURUSD forecasts to parity at Q1
2016). A gradual decline of real yield support, a further building of short EURUSD
positions by investors and a deteriorating balance of payments situation all signal
weakness for EURUSD going forward. Our BNP Paribas CLEER™ forecasting
model also indicates that EURUSD is likely to decline towards parity. See the
above linked document for further details.

Technical analysis is indicating that 1.1450-90 is a key resistance level for
EURUSD. This weekly resistance at 1.1490 coincides with a strong four-hour
bearish trend line which has been working extremely well since May 2014. As a
result, we view that current levels are attractive for entering bearish EURUSD
positions.

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