Euro to Dollar: Buying EURUSD High Conviction Trade at Westpac

Strategists believe any weakness in the euro exchange rate complex should be traded to the upside.

The euro to dollar exchange rate should continue to see weakness as being temorary in nature argue strategists with Westpac in Sydney.

"Look to buy dips in EUR to 1.1230 with a stop at 1.1110. This remains driven by the model and technicals signals; our macro view is neutral as weak German data leaves EUR a poor choice to position for USD vulnerability," says a note from the bank.

Technically, price action in EURUSD has stabilised above key medium term support towards 1.1100, while the Westpac G10 FX model portfolio remains long EUR though pares back its position.

"A sharp fall in our EUR total yield signal ahead of this week’s ECB meeting is the main driver of the reduction but the Eurozone's strong current account momentum signal continues to buttress the model’s ongoing bullish stance on EUR," say Westpac.

The High Conviction trade is a model that uses a combination of systematic model based screening, in depth fundamental analysis and a methodical technical approach to generating trading signals for G10 FX markets

The model obviously works as it enjoys a total return since inception of +12.65%.

The process is designed to isolate the research departments highest conviction trades on a weekly basis, highlighting alignment between the below three approaches. When these approaches are aligned the conviction will clearly be strongest; when they are not aligned, strategists advise they will stand aside and await better opportunities.