EUR/USD enjoyed the dollar’s weakness to rise above the limited range that confined it recently. But can it extend to higher ground or is it set to slide? Here are two opinions:
Here is their view, courtesy of eFXnews:
EUR/USD: Unplugged But Recharging; Where To Target? – Danske
Danske Bank FX Strategy Research believes that EUR/USD will stay within the 1.04-1.10 on a 3-month horizon.
However, in the near-term, Danske sees EUR risks mainly on the downside as (i) the Fed is set to become somewhat less accommodative than the market is pricing at present, and (ii) ECB will have to scrap exit discussions and extend QE (delivering no deposit-rate hike) as a drop in inflation ahead will increase the pressure for more easing.
Longer term, Danske maintains that fundamentals such as valuation and current account balances remain supportive and will drag EUR/USD higher down the road.
“Thus the cross is set to be range-bound near term and we have pencilled in some limited downside near term,” Danske argues.
Danske now targets EUR/USD at 1.06 in 1-month and 3-month, and targets a broad rally towards 1.14 in 12-month.
EUR/USD is currently trading circa 1.0730 as of writing.
USD: Less Supportive Environment; EUR: Weakness To Re-Emerge On Crosses – Citi
CitiFX Strategy Research notes that markets are likely starting to discontinue the potential speed and scope of the US tax reforms as expectations for substantive moves on tax and fiscal policy in the months ahead have receded among many investors.
“This implies a less supportive environment for USD,” Citi argues.
On the EUR front, Citi still holds the view that the single currency is likely to see range trade in the days ahead as investors could be reluctant to take positions ahead of the French election.
In that regard, Citi notes that its flows metrics suggest EUR weakness to resume on crosses under position reductions.
