The euro's slide has been steep lately, but this strategist sees some leveling out ahead.
With apologies to Bette Davis, the euro has been experiencing quite the bumpy night. But Jens Nordvig, global head of G10 FX strategy for Nomura Securities, says the slide seems to be slowing.
"We continue to think that the medium-term trend for EURUSD is down, as reflected in our revised target for EURUSD of 1.18 for end-Q3 and 1.15 by end-2012," he wrote in a note to clients. "But we are not convinced that we are about to see imminent acceleration to the downside from a trading perspective."
Nordvig in June pointed out that the the euro was experiencing capital flight, but he says that process moderated in June and early July. He also says investors are differentiating more between euro zone credit risks: "sovereign tensions are currently concentrated around Spain and Italy, while France and Belgium are trading quite strongly," he says, pointing specifically to solid demand for French debt.
Global factors are contributing as well, Nordvig says. The euro typically benefits when oil prices strengthen, as they are now, and "the US data picture has worsened meaningfully recently."
Nordvig is exiting almost all of his bearish euro positions, he says, and "we will be looking for fresh opportunities, potentially in relative value form as markets adjust further after a volatile Q2."
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