EUR downside remains well supported
EURUSD came under some initial pressure after ECB president Draghi re-iterated his comments from last week’s pressconference saying that policymakers were watching the incoming data and were ready to act again if necessary. The brief dip below 1.3050 once again found support and we continue to perceive downside risks to the EUR as limited due to on-going significant support from European market sentiment. Both European financial equities and the core-periphery spreads have been moving in a favourable direction and indicate that EURUSD can potentially strengthen to the 1.34-1.35 area. Our European economists are forecasting more softness in European data today, including a 1.8% m/m drop in Germany’s March factory orders. However we do not believe this will cause significant damage to the EUR. We maintain a long EURUSD trade recommendation established at 1.30, targeting 1.34, with a stop at 1.2840.
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BNP Paribas