Credit Agricole says USD levels attractive for buyers
This week's volatility more likely reflected of a lack of market liquidity rather than any meaningful shift in Greece repayment probabilities. The EUR/USD's near 300 point move - a large proportion without supporting headlines - likely reflects this.
Unfortunately with price action sending a warning to short-term liquidity providers, we recommend treading with caution as liquidity vacuum could easily be repeated.
While the move stopped us out of our short EUR/USD position for 3.10% profit, we retain our bearish outlook. Indeed we will look for another opportunity to sell EUR/USD once the Greece-EU dust has briefly settled.
In terms of USD specifically, it is difficult to see Fed expectations being anything other than supportive ahead of Friday's US Non-Farm Payrolls. So far this week's US data have been somewhat mixed, but they should not distract from the firming underlying trend in US growth.
As such current USD levels provide an attractive opportunity to buy. As we wrote in last FX Weekly, USD/JPY is the path of least resistance in the core while USD-funding dependent peripherals also provide attractive targets.
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