FXstreet.com (San Francisco) - Rabobank said in a recent article
that there is "weak currency factors on both sides of the Atlantic"
and despite they aren't "contesting the USD's safe haven value",
the US "fundamentals are weak" and these economic data "is likely
to prevent a free-fall" in the EUR/USD. Rabobank expects "EUR/USD
to remain close to the 1.2200 level on a 3 mth view pushing higher
towards USD1.25 in 6 mths."
On the other said, Commerzbank comments in a article published the
end of the week that their "analysis concludes that it will be
impossible to deny the attractiveness of the US dollar." But the
Yen, as sample, "could cease to be regarded as a safe haven in the
long run." Its EUR/USD outlook is clear: "The forces which are
driving EUR-USD, i.e. QE3 on the one hand and debt crisis on the
other hand, are likely to continue to be well balanced."
Commerzbank also comments on the economic data topic: "Unless we
see a fundamental re-valuation, EUR-USD will thus remain in a state
of flux. In our view the risks are concentrated on the downside
In the same line of Rabobank. The Dutch bank believes that in the
middle term the "weakness on both sides of the Atlantic is likely
to pan out into more choppy range trading for EUR/USD." On a 12
month view, Rabobank "anticipates that EUR/USD can climb back
towards 1.35, though this assumes the Eurozone politicians can
continue to edge towards a solution for the crisis."
Friday's session was a quiet session with the EUR/USD closing with
a testimonial 0.02% gain at 1.2286. In the week, the Euro lost
around 100 pips from Monday's opening at 1.2387 to the mentioned
1.2286 after four negative days in row. But it wasn't too big
movements if we see the previous weeks volatile conditions. UBS
commented that market is in "calm Before Storms," and the bank
states in a Geoffrey Yu and Manik Narain report that "markets
remain calm for now but anxiety will rise as risk events build
towards the end of August."
Next week will be busy of economic data across the world. Retail
sales in US, GDP in Germany and the whole Eurozone, employment
report in UK, monetary reports in Japan and inflation in UK and US.
But despite the "news on the periphery should remain the primary
driver for FX market in the coming week," points UBS analysts,
"there are growth hurdles globally to overcome too."
Specially when, as Bank of America Merril Lynch wrote in a report,
that "medium-term growth in retail sales is likely to remain weaker
than before the financial crisis." According to BoA, now the
consumer is more focused "to save and pay down debt than to spend,
and are spending a greater proportion of income on services and
increased costs of living." So, they expect a weak 0.2% rise in
Retail sales in July, and it is sample of market will focus during
the next week.
Said that, "Global markets have taken a breather during this week
after a volatile environment during the previous week when
'help-is-on the-way' commentaries by European officials did not
come to fruition," Wells Fargo observes in a research note.
Wells Fargo suggests that the lack of data coming out of the
Eurozone during this week may have had something to do with how
"calm" markets have been, and says that "this is likely going to
change in the coming week when Euro zone GDP for the second
quarter, as well as industrial production numbers for June, are
As a short term outlook for the EUR/USD, Danske Bank says that the
pair could see more downside. According to M.Helt, Senior Analyst
at Danske Bank, "we see a risk that EUR/USD could continue to
decline until we see further signs of policy responses from either
ECB, Fed or China. It has now been one week since Draghi told the
markets that the ECB is ready for open market operations at the
front end of the curve if assistance is requested".
Finally, in a CFTC Commitment of Traders Report for the week Ending
August 7, TD Securities says that "Net short EUR positioning was
trimmed again in the latest week, falling to a net total of 131.7k
contracts, down from 138.9k contracts in the July 31st week."
TD points that "this is the smallest net short EUR spec position
since the start of May, just before EUR/USD started its rapid
descent from the USD1.32 (spot) area." Despite that, "Net EUR
shorts still represent the biggest aggregate exposure in this
market in USD terms (USD20.4bn equivalent, we calculate),"