Scope for EUR/AUD to slip to 1.41-1.43 - Westpac

In view of Sean Callow, Research Analyst at Westpac, there is a scope for EUR/AUD to slip to 1.41-1.43 in coming weeks led by the ongoing global macro uncertainty.

Key Quotes

“The euro has rallied further than we expected recently, with help from markets effectively removing the risk premium from the French presidential election, well ahead of the second round runoff.”

“A large overhang of speculative short EUR positions has helped fuel the euro gains. But we expect ECB president Draghi to push back hard on calls for a notably less dovish stance in June, with inflation still so far from target. This should keep a lid on EUR yields.”

“AUD has underperformed all but CAD in the G10 over the past month, with speculative longs under pressure from the slide in iron ore prices and bouts of risk aversion, especially linked to the Korean peninsula.”

“Commodity prices probably won’t provide too much inspiration for AUD near term, but official data should remain supportive of AUD/USD. A better tone to Asian regional trade should also aid risk appetite, helping AUD recapture some of its recent lost ground on crosses including versus the euro.”

“This suggests scope for EUR/AUD to slip to 1.41-1.43 in coming weeks. Declines beyond this area would require either an unexpected euro slide (Le Pen?) or a sharp improvement in Australia’s sluggish domestic economy.”