Barclays says to fade any bounces in the euro

Investors following tactical strategies should consider staying short and fade bounces this week, advises Barclays Capital in its weekly FX pick to clients. Barclays’ rationale behind this call is macro-technical based going into this week ECB meeting on Thursday and the US jobs report on Friday.

On the ECB meeting…

“In the euro area, the ECB’s meeting followed by President Draghi’s press conference will dominate the agenda this week. Both we and the consensus expect no change in policy, with the ECB likely assessing the effect of already announced measures before considering whether additional action is needed…We continue to think the ECB will have to do more in order to re-invigorate inflation and expect it to commence with EGB purchases as soon as Q1 2015. As a result, we continue to expect significant EUR weakness over the medium term and recommend staying short EURUSD into next week’s meeting,” Barclays projects.

On the US jobs report…

“We expect another solid outcome with headline NFP of 225K and the unemployment rate declining one-tenth to 5.8% (consensus: 234K and 5.9%). Wage growth, especially the headline data, is yet to pick up materially, but we expect it to increase gradually over time following the decline in unemployment rate . For this month, we expect average weekly earnings of 0.2% m/m and average weekly hours of 34.6 in line with consensus,” Barclays adds.

On EUR/USD technical outlook…

“A combination of near-term topping signals on the EURUSD daily plot point to resumption of the greater downtrend. We are bearish and prefer to fade any upticks against the range highs near 1.2890. A move below the 1.2500 area would confirm the overall move lower and downside traction towards initial targets near 1.2460. Beyond there, we expect a move towards 1.2100 and then 1.2040, the 2012 range lows,” Barclays advises.

The good news is they already hit 1.2460.

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