Macro trading idea from Westpac
Westpac suggests selling the euro at 1.0580 (spot at 1.0567) with a stop at 1.0640 and target of 1.0390.
Here is the rational:
- Despite strong survey data, Eurozone core CPI (flat at 0.9%) and credit data remain soft
- German Factory orders, especially for investment orders, for January were surprisingly soft after a strong December reading. This suggests that data may soften during the quarter and that Jan Industrial Production may miss current expectations
- The ECB is unlikely to alter its stance when it meets on Thursday. In fact, the continuing need for recapitalisation in the banking sector and the weight of NPL's in the Eurozone suggest that current accommodation remains appropriate
- European political risks are also likely to cap EUR and sustain ECB's accommodative bias
- The FOMC has effectively baked a March hike in the cake on the back of solid data, irrespective of any Trump Administration policies
- Although NFP on Friday may pose a risk, the current consensus of 190k is actually below the simple average seen since early 2011 (202k)