FXStreet (Łódź) - Jaco Rouw, Core FI Investment Manager at ING Investment Management suggests that the enthusiasm of the dollar bulls, provoked last week by the Euro weakening finally and breaking below key 1.35 – 1.3475 levels, is premature.
“Firstly, many brokers were waiting for the break of 1.35 – 1.3475 and mentioned there were sizeable stops below these levels. With this in mind, the fact that EUR/USD has dropped a whopping 11 pips must be disappointing for dollar bulls.”
“Secondly, the main driver of the move lower in the EUR/USD exchange rate is euro weakness, in our view, and not dollar strength. Since July 14, the EUR/USD was still trading above 1.36, the euro has been weaker against USD, GBP and NOK to a more or less similar extent.”
“In the same period, the US dollar has been more or less stable versus the yen and Canadian dollar, and has been somewhat weaker versus the Australian dollar.”
“Versus emerging market currencies, the US dollar has also been stable on balance, although it first strengthened by over 1% before weakening again in the last few days.”
“The real Euro-US interest rate spread is still moving in favour of the euro. The same can be said for peripheral spreads and related capital inflows into the Eurozone.”
“Adding it all up, we are not convinced that the break of 1.3475 is the start of a sustained move lower in EUR/USD.”