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EUR/USD topped 1.25 on Draghi’s weak jawboning but fell back down when Trump trumped up the dollar. What’s next?

Here is their view, courtesy of eFXnews:

EUR/USD: Flows To Drive Further M/T Strength; Valuation Models Point To 1.29; Dips A Buy – Danske

Danske Bank Research discusses EUR/USD outlook and thinks that  the pair is prone for further medium-term strength through the coming months on the back of strong flows.

What we are witnessing at present may in an FX-context be summarised via the concept of broad basic balance of payments (BBoP) which combines the current account, portfolio and direct investment flows to capture the underlying commercial demand for a given currency.

“With  the demand for euros in our view set to be underpinned by a reversal in euro-area portfolio flows and a continued current-account surplus,  relative BBoP developments are likely to provide EUR/USD support for some time still,” Danske argues.

While we are closing in on fundamentally justified levels of EUR/USD (our valuation models suggest 1.29 for the cross), we stress that strong forces are driving the pair from either leg which in our view continue to make  EUR/USD a buy on dips,” Danske concludes.

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EUR/USD: A Round Of Profit-Taking; Looking For Opportunities To Buy Dips – Credit Agricole

Credit Agricole CIB Research discusses EUR/USD outlook and notes that its ongoing dip reflects a round of profit-taking as  some EUR-positives and a lot of USD-negatives seem to be in the price by now.

“That said,  we doubt that a trend reversal lower would be on the cards for the FX pair. Indeed, it seems that the EUR/USD rally since the start of 2018 largely reflects the recent sharp deterioration of the USD market sentiment of late.

To the extent that the USD-bashing continues in coming days,  any dips in EUR/USD may prove attractive buying opportunities,” CACIB argues.

USD: No Catalyst On The Horizon To Trigger A Break From This Weak USD Trend – ING

ING Research discusses the USD outlook in light of the latest  trigger  that has been added to USD weakness on the back of US Treasury Secretary Mnuchin’s comment that a “weaker dollar is good” for the US.

It feels like what we expected to happen to the dollar over the entirety of 2018 has in fact transpired in first few trading weeks of the year.

We suspect it is the sheer frankness of Mnuchin’s comment and the idea that the Trump administration is happy to employ ‘America First’ policies –   even if it means at the cost of a weak $ – that has caught markets by surprise.

We’re scratching our heads for catalysts to see a break in this weak $ trend,” ING argues.

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