From the FXWW Chatroom: Levels EURUSD:
Support – 1.0830/1.0821/1.0800/1.0775/1.0707
Resistance – 1.0880 (200 DMA)/1.09065/1.0934/1.1000
Comment: Very constructive break higher after taking out the year’s highs after the open yesterday. EUR traded through the 200 DMA at 1.0882 and broke the trendline from the May 2016 highs shortly after that. ECB’s Lautenschlaeger sparked EUR buying on comments that we should expect a policy change from the ECB, which in my eyes is an indication of bringing rates higher before tapering QE. We ran into good offers above 1.0900 and saw a pullback towards 1.0875, which also seems to hold in well. I prefer to buy the dips with a stop below 1.0830, I don’t want to be short, but the risk of an extended pullback outweighs my conviction for an imminent follow through on top. The data schedule remains very light from Europe and the US today, but we do get FED speakers again today including chair Yellen.
Support – 1.0830/1.0821/1.0800/1.0775/1.0707
Resistance – 1.0880 (200 DMA)/1.09065/1.0934/1.1000
Comment: Very constructive break higher after taking out the year’s highs after the open yesterday. EUR traded through the 200 DMA at 1.0882 and broke the trendline from the May 2016 highs shortly after that. ECB’s Lautenschlaeger sparked EUR buying on comments that we should expect a policy change from the ECB, which in my eyes is an indication of bringing rates higher before tapering QE. We ran into good offers above 1.0900 and saw a pullback towards 1.0875, which also seems to hold in well. I prefer to buy the dips with a stop below 1.0830, I don’t want to be short, but the risk of an extended pullback outweighs my conviction for an imminent follow through on top. The data schedule remains very light from Europe and the US today, but we do get FED speakers again today including chair Yellen.
EURUSD reacted little to a new Ipsos French Election poll showing M. Le Pen narrowly leading E. Macron (25% vs 24%) and F. Fillon polling 3rd at 18%. In a research note published today, we note that polling suggests Ms. Le Pen has a high chance of winning the first round but losing in the second, irrespective of whether she faces Messrs. Macron or Fillon.
Though unlikely, a tail risk “global dislocation scenario” of a Le Pen victory is a non-zero probability. In our view the most heavily impacted currencies would be Euro (up to 10% lower in TWI terms) and EM (up to c.15% lower vs USD). The impact on the dollar is likely to be substantially smaller (up to 4% appreciation), but US 10y yields could fall by up to 100 bps.
A slate of central bank speakers today should provide further clarity on reflation expectations vis-à-vis policy thinking. ECB Boardmember Coeure and Riksbank Gov Ingves are scheduled to speak, followed by BoC Gov Poloz and Fed Chair Yellen.
Though unlikely, a tail risk “global dislocation scenario” of a Le Pen victory is a non-zero probability. In our view the most heavily impacted currencies would be Euro (up to 10% lower in TWI terms) and EM (up to c.15% lower vs USD). The impact on the dollar is likely to be substantially smaller (up to 4% appreciation), but US 10y yields could fall by up to 100 bps.
A slate of central bank speakers today should provide further clarity on reflation expectations vis-à-vis policy thinking. ECB Boardmember Coeure and Riksbank Gov Ingves are scheduled to speak, followed by BoC Gov Poloz and Fed Chair Yellen.
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