Back
22 May 2013
Flash: What to expect in EUR/USD on Bernanke - BMO Capital Markets
FXstreet.com (Barcelona) - Ahead of today´s Bernanke testimony, Stephen Gallo, European Head of Currency Strategy at BMO Capital Markets has taken a look at what it could mean for EUR/USD.
He begins by noting that given the strength that has been seen in EUR/USD so far this week, he suspects that the pair is roughly priced for a rather neutral outcome from Bernanke this afternoon (or even slightly dovish), with the spot level now roughly 0.70% above its recent low, printed over time in the wake of the three consecutive lower-than-expected prints on US initial jobless claims between the weeks of April 19th and May 3rd.
He feels that this would make a temporary move into the 1.2980 area today (roughly 1.10% percent above the aforementioned low) justifiable if Bernanke merely confirms this “neutrality”, but he cautions that this is still a very supportive environment for the USD and that many participants are still likely to attempt to position themselves for the next round of positive US data at these levels or a bit higher. On the dovish side, he adds that his best judgement is that an outcome this afternoon from Bernanke which neither downplays the efficacy of the Fed doing additional QE nor suggests that the Fed may be seeking an additional “pricing in” of QE tapering would perhaps be the best possible environment for a 1-point move or so higher in the EUR and the GBP versus the USD. He writes, “In EUR/USD, we think it would take about this much or a little bit more in rhetoric against QE tapering to force a test of the 1.3030 – 1.3040 resistance area in the pair.”
He begins by noting that given the strength that has been seen in EUR/USD so far this week, he suspects that the pair is roughly priced for a rather neutral outcome from Bernanke this afternoon (or even slightly dovish), with the spot level now roughly 0.70% above its recent low, printed over time in the wake of the three consecutive lower-than-expected prints on US initial jobless claims between the weeks of April 19th and May 3rd.
He feels that this would make a temporary move into the 1.2980 area today (roughly 1.10% percent above the aforementioned low) justifiable if Bernanke merely confirms this “neutrality”, but he cautions that this is still a very supportive environment for the USD and that many participants are still likely to attempt to position themselves for the next round of positive US data at these levels or a bit higher. On the dovish side, he adds that his best judgement is that an outcome this afternoon from Bernanke which neither downplays the efficacy of the Fed doing additional QE nor suggests that the Fed may be seeking an additional “pricing in” of QE tapering would perhaps be the best possible environment for a 1-point move or so higher in the EUR and the GBP versus the USD. He writes, “In EUR/USD, we think it would take about this much or a little bit more in rhetoric against QE tapering to force a test of the 1.3030 – 1.3040 resistance area in the pair.”