Long EUR/CAD at 1.3995 levels - Westpac

Research Team at Westpac recommends to go long on EUR/CAD cross at 1.3995 levels while maintaining a stop loss of 1.3930 for the target price of 1.4210.

Key Quotes

“G10 crosses offer cleaner opportunities near term given binary risks round President Trump's address before Congress, FOMC Chair Yellen's speech later this week and payrolls next week.”

“Eurozone data has been persistently firm, the PMI’s and confidence surveys signaling upside risks to the near term growth profile. Retail sales (Friday) are likely to rebound from disappointing Dec.”

“On the Canadian side there have been some constructive developments: Jan headline CPI at 2.1% is back above the BoC's 2% mid-range target, while international trade, employment and manufacturing have been on the stronger side too. The risks of a NAFTA trade shock have receded as well, President Trump recently signaling that Mexico is in the cross hairs moreso than Canada. But, it hasn't all been one-way: core inflation readings remain very subdued, retail sales have underwhelmed two months in a row, building permits have fallen and BoC concerns about tighter financial conditions stemming from higher global rates will still be in place. Altogether the BoC - meeting tomorrow - is unlikely to change tack just yet and overarching narrative should continue to lean toward potential easing.”

“While the near term event risk would seem to favour further EUR/CAD upside CAD has curiously already sharply underperformed this week and as such current levels in EUR/CAD do not offer an ideal entry point. We prefer to buy a pullback toward 1.40.”