Forecast for the Euro 2013
2013 View from Barclays:
In the near term (the next three months) we expect Spain to request a precautionary programme that would allow the ECB to activate the OMT programme and purchase Spanish debt and drive Spanish sovereign yields lower. The precise timing for this is difficult to call but our economists expect that, given Spanish issuance needs for next year of EUR90bn and muted demand, the request is likely to be early in 2013.
The activation of the OMT will likely help improve market sentiment and support all European currencies. However, in the medium term we expect EUR strength to be limited for a number of reasons.
First, implementation risks due to fiscal slippage in various programme countries will likely remain a hurdle for sentiment in the region. Second, the ECB is likely to further ease monetary conditions in the EA with our baseline view that the refi rate will be cut by 25bp in Q1 13 while further easing measures are likely later in the year. Our USD view reinforces the EUR forecasts.
Technical Forecast for EUR/USD, Week Starting 14th January
Authors: Shaun Osborne and Greg Moore at TD Securities:
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The daily pattern of trade in EUR/USD remains bullish. Over the turn of the year, EUR/USD slippage extended a little below the 1.3137 neckline of the bullish, inverse H&S signal we had latched on to late last year but (as we stressed was needed to sustain the bull tone), weakness was transitory.
The strong bid for the EUR on Friday suggests fresh longs are being layered into the market near new cycle highs.
Note that short, medium and long-term trend momentum signals remain bullishly aligned, as does the golden cross on the 40/200-day MA crossover (with the 40-day MA proving key support over the past week).
This implies limited scope for downside corrections. The daily pattern of trade targets 1.36 in the next 1-3 months.
We think that EUR dips will be limited to the 1.3250/75 area next week.