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Forex Flash: EUR/USD key to EUR cross direction – Societe Generale

Kit Juckes, Global Head of Currency Strategy at Societe Generale believes that investors should look to re-buy EUR/JPY and EUR/GBP if EUR/USD tests and holds 1.3400.

He feels that after a huge risk rally at the start of 2013, markets are in a correction, induced by a weaker US equities and Spanish political uncertainty. Juckes notes that the corrections in European equity and bond markets have reversed a couple of months’ worth of price gains, whereas the EUR/USD move is far smaller – reversing only a few days of gains. That tells him something about positioning and sentiment which in terms of the Euro is not yet overly bullish.

He writes, “Without the bullish backdrop needed for a large-scale capitulation, we are more likely in a mild correction than at a turning point. On the basis of the last couple of meaningful corrections, the level to buy EUR/GBP and EUR/JPY is when EUR/USD is around 1.34, though a bounce is unlikely until after the ECB meeting on Thursday.”

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