Goldman Sachs holds a bearish outlook on EUR/CAD, targeting a move to 1.44, in anticipation of this week's ECB meeting. The firm argues that despite EUR/USD hovering around the 1.08 level for approximately two months due to counteracting market forces, the ECB's forthcoming meeting is likely to highlight the availability of significant data by June, potentially setting the stage for rate cuts. Moreover, with Euro area growth expectations stabilizing while the US surpasses consensus forecasts, Goldman sees a skewed downside risk for EUR/USD and views the Euro as an attractive funding option under current market conditions.
Key Points:
EUR/USD Stability: The currency pair has been stable around the 1.08 level due to balancing market forces, with no immediate factors prompting significant movement in either direction.
ECB Meeting Focus: The upcoming ECB meeting is expected to reiterate the central bank's wait-and-see approach until the June meeting when substantial data for decision-making on rate cuts will be available.
Growth Expectations: While growth expectations in the Euro area have found some stability, the US has outperformed consensus forecasts, suggesting potential continued strength for the USD against the Euro.
Trade Recommendation: Goldman recommends a short position on EUR/CAD, targeting 1.44, based on their analysis of current market dynamics and expectations for limited upside potential for the Euro.
Conclusion:
Goldman Sachs advises a cautious stance on EUR/CAD, forecasting a move towards 1.44 as the market anticipates Wednesday's ECB's meeting and considers broader economic data. The firm highlights the comparative strength of US growth expectations against those in the euro area, influencing their bearish perspective on the Euro and recommending it as a viable funding option in the current environment.
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