Both the euro and the yen had roller-coaster weeks against the US dollar amid rising market volatility. What’s next?
Here is their view, courtesy of eFXnews:
ING Research discusses the USD outlook by looking at the divergence in US yields and the USD performance, and notes the following key points.
” i) this year’s rise in Treasury yields look to have been driven more by the term premium and embodying US fiscal risks, thus a weaker dollar is the cost of financing larger deficits,
ii) the recent sharp adjustment in correlations happens rarely and on average has seen USD/JPY decline 6% over a subsequent 3 month period,” ING notes.
“We have medium term fair value calculations for EUR/USD and USD/JPY at 1.22 and 104 respectively. However, we believe the dollar risk premium can see the dollar extend into undervalued territory and currently have conservative year-end targets for the two pairs at 1.30 and 100,” ING argues.
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