Tuesday, September 29, 2015

Euro: Set to bounce before the ECB – SocGen

FXStreet (Delhi) – Research Team at Societe Generale, suggest that there are several factors suggesting that the next three weeks could offer the opportunity to trade a EUR/USD tactical rebound towards 1.14-1.15. The technical picture is asymmetrical on the bullish side, Eurozone PMIs are resilient, the dovish ECB is certainly discounted, the risk of a US government shutdown won’t help the dollar, and the EM sell off is prompting investors to put cash in safe currencies.

Key Quotes

We recommend a 3W topside exotic trade to get leverage between 1.13 and 1.1550.

“Volkswagen’s woes should not be a lasting euro engine: The scandal certainly has weighed on the euro lately, via the threat that the crisis hitting the world’s second-largest carmaker could hit the German economy. After a dramatic 30% fall to 2012 lows, Volkswagen shares seem to have stopped falling and traded volumes are now diminishing.

“Dovish ECB probably in the price: The ECB stance is certainly the main bearish euro factor for the coming weeks. Our economists expect the ECB to be dovish (weaker inflation outlook), but with still ample evidence of resilience in the euro area economy, as witnessed by resilient September PMIs, it is still too early for the ECB to act. Fed inaction and China weakness are not necessarily a signal for the ECB to do more.”
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