Weekly momentum is very stretched here. It is more stretched than it was last year when EURUSD peaked. Lower levels on the pair from here will lead the momentum to cross back down.
Rising asset prices and healthy enough technical’s – improved exports and strong confidence in manufacturing in USD – paint a positive picture for China too.
Moreover, geopolitical risks and structural technological shifts on inflation are keeping developed world yields relatively low – rightly or wrongly – so the hunt for carry remains robust. While we do expect to see higher US and German yields in the medium term, the pace and timing of a move higher are unlikely to be aggressive enough to derail the “carry trade” though this will remain a work in progress.
This move down on EURUSD is a corrective phase before 1 more move up later in the year.
|Comments||Allow several weeks for the trade to develop|