EUR/USD dropped under 1.20 and remains under pressure. Will it continue all the way to 1.15? Bank of America lists 8 reasons to go short.
Here is their view, courtesy of eFXdata:
Bank of America Merrill Lynch Research discusses EUR/USD outlook and maintains its bearish bias expressing that via holding a short EUR/USD* position targeting a move to 1.15.
In particular, BofAML outlines 8 reasons for maintaining this bearish view and short position.
1- “Continued soft Eurozone data in April discredits the “bad weather” theory but lends support to the “euro is too strong” theory.
2- In the US, the recent upturn in business investment is paving the way for higher productivity and wage growth.
3- A NAFTA deal over the next few weeks should increase US leverage in trade negotiations with China.
4- Corporate America may use the Q1 earning season to repatriate their offshore cash.
5-Continued Chinese deleveraging will limit the ability of the PBOC to match further Fed hikes.
6- The flatness (steepness) of the US (Eurozone) yield curve means foreign investors will only consider currency unhedged (hedged) investment in US (Eurozone) bonds
7- The fiscal risk premium in the USD is already very high.
8- Divergence between momentum and positioning are turning the tables on overextended EUR longs,” BofAML argues.
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