We remain the EUR/USD bears.
On Tuesday, Hedgeye CEO Keith McCullough issued another short signal in the EUR/USD (via the etf FXE) in our Real Time Alerts product. Here’s a portion of what he wrote:
If the Chinese think Draghi is going to sit idle and not devalue-back, they have another thing coming. As growth and inflation continue to slow, globally, I fully expect this central-planning FX War to continue.
Notably, the next days will bring parliamentary votes on Greece’s third bailout. Make no mistake, the top Eurocrats (ECB’s Mario Draghi & Germany’s Angela Merkel) are incentivized to plug Greece’s credit hole. So, expect ‘debt relief’ in some form, but no great solution to Greece’s larger, leviathan structural issues. (Never mind the flawed nature of a currency union regulating uneven economies with one monetary policy.)
We continue to expect slower growth in the region from here. This should put increased pressure on Draghi to issue more QE. As Hedgeye Europe analyst Matthew Hedrick wrote in this morning’s Early Look:
Look to Jackson Hole at the end of the month (Aug. 27-29) as an opportunity for Draghi to talk down the Euro. An increase in his QE target would send the Euro falling.