Westpac - "EUR Bias: Risks building for a bigger topside break through 1.34, despite firming tapering expectations.
Likely decent German GDP and ZEW data vs probable spotty updates on US retail sales and the first of the Aug business surveys (odds of a second consecutive monthly surge seem low) should see EUR bought into dips for the week.
Note too that while tapering expectations have pushed bund-Tsy spreads out to 7 year wides,EUR/USD is more typically driven by shorter term spreads which continue to drift in EUR’s favour amid narrowing peripheral sovereign spreads and firmer German data.
We remain EUR negative though on longer term forecast horizons given the relatively more secure US growth picture and the ever present risk of political dysfunction in Greece, Italy, Spain and Portugal.
USD Bias: Looking for the USD to cede more ground in the coming week. US retail sales and the first of the August business surveys are more likely than not to come in on the weaker side of expectations vs probable decent German ZEW and GDP updates. Fedspeak unlikely to give the USD much of a lift either with Bullard (more focused on inflation undershooting the Fed’s targets) scheduled to speak no less than three times.
Look for the USD index to base into 80-81 before resuming its bigger multi month uptrend."