EUR: Staying Tactically Short For Next 2 Month Targeting A Retest Of 1.0340 – TD
EUR/USD is getting used to a lower range, around 1.05. Can it fall even further? Here is the view from TD:
Here is their view, courtesy of eFXnews:
In Europe, the focus remains on the French elections. Indeed, the EUR is largely ignoring the pickup in Feb PMIs given the news that Le Pen continues to inch higher in the polls. This weekend saw an Ipsos poll show Le Pen with 26% support versus 19% for Macron and 18.5% for Fillon. Other polls have shown a bit more dispersion, leading to the increased uncertainty about upcoming elections. We also note that the recent news of a political alliance on the political left clouds the outlook for the election. The rub here is that a second round that features a group left candidates could reduce turnout, helping to favor Le Pen. The French-German 2y spread has surged since the start of the year, shifting the drivers for the EUR.
The combination of rising political risks and lower real rates creates a toxic mix for the EUR.
We prefer to tactically remain short EUR in the G10 over the next two months and look for a retest of the recent lows near 1.0340.
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