The euro has bounced more than 50 pips from the lows today as a broad move to sell the US dollar kicks in. Worries about US housing and soft consumer spending are incubating the idea that the Fed could be on hold deep into 2015.
But Bank of America Merrill Lynch says the euro is in much worse shape than the US dollar. They recommend selling at 1.3735 (spot at 1.3711) with a target of 1.3104. They’re willing to continue adding to shorts up to 1.3825 with a partial stop at 1.3920 and a full stop at 1.3995.
Beside ECB easing they say European banks stocks appear to be topping and note a head & shoulders pattern on the Eurostoxx bank index (the 100dma also broke today for the first time since July 2013).
Eurostoxx bank index – head and shoulders
Me and Ryan are on the opposite side of the EUR/USD trade. I like this recommendation and the reasoning behind it. The ECB is going to make some unprecedented moves in June and although QE is not yet in play, it’s on the table.
