EUR/USD has been marked by significant volatility in recent weeks. What are the short-term and long-term outlooks towards the pair?
Here is their view, courtesy of eFXdata:
“We see EUR/USD ranges around current spot for an extended period of time: short term, we target the cross between 1.07 and 1.11, longer-term one should brace for wider swings (say, 1.05-1.15) due to the risk of new virus waves and recovery hiccups – but our preposition is to sell upticks,” Danske notes.
Elevated volatility allows one to play this view in what we regard attractive ranges. Specifically, we recommend short strangles with longer tenors. By extension, the lack of clear direction in the cross hints that one should not necessarily overweight USD hedge ratios relative to benchmarks despite the now lower hedge costs. Rather, we suggest clients focus on hedging in longer tenors (e.g. out to 1Y) to guard against new episodes of ‘milder-than-March’ stress that tend to affect forwards (rather than spot) and/or to exploit current subdued quarter- and year-end pricing,” Danske adds.
For lots more FX trades from major banks, sign up to eFXplus
By signing up for eFXplus via the link above, you are directly supporting Forex Crunch.
Share
