EUR/USD is extending its gains on a variety of factors, from USD weakness on the Fed’s dovish hike and Trump’s failure to the optimism about Europe. What’s next? Here are four opinions:
Here is their view, courtesy of eFXnews:
EUR/USD: Factoring In Current Account: Where To Target? – CIBC
CIBC World Markets Research still holds the view that the US’s sizeable current account deficit would put a cap on how much the greenback strengthens as the Fed raises rates.
In that regard, CIBC argues that even though the US current account unexpectedly improved in Q4, concerns still remains it’s very unlikely that it will continue to offset any further deterioration on the trade front.
“We see many major currencies, particularly the euro due to the region’s large current account surplus, ending the year stronger against the US$,” CIBC argues.
CIBC targets EUR/USD at 1.10, 1.13, and 1.14 by the end of Q2, Q3, and Q4 respectively.
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EUR/USD: Is It Time To Sell Again? – Credit Agricole
Credit Agricole CIB Research argues that EUR/USD is running ahead of fundamentals agian on the ground that the pair’s underlying drivers have not improved all that much despite the pair’s recent rally.
“Indeed, the gap between the pair’s value and the level that is consistent with its relative fundamentals has started to widen again, making EUR/USD an increasingly interesting short,” CACIB argues.
Looking ahead, CACIB makes that case that cautiousness is still warranted ahead of the French election noticing that bets on early ECB policy-normalization seem rather premature, and investors’ scepticism about the prospects for fiscal stimulus in the US looks overdone.
As such, CACIB expects downside risks in EUR/USD to grow again in the near term and advises considering short positions into the recent rally.
EUR/USD: Awaiting A Breakout?; GBP/USD: S/T Pause – SocGen
Societe Generale FX Technical Strategy notes that EUR/USD is now piercing above the neckline and is close to the key hurdle at 1.0810/60, which represents the graphical level consisting of May/July 2015 and the 38.2% retracement from August 2015.
“Once a breakout happens, it will mean an extended recovery towards a projection at 1.0940/85. The potential of the pattern is at 1.13,” SocGen argues.
Moving to GBP/USD, SocGen notes that the the pair has recently rebounded and is undergoing a temporary consolidation in what appears to be a pattern similar to a triangle.
“The triangle limit and weekly channel at 1.2680/1.2780 remains an important hurdle,” SocGen adds.
EUR: Close To A ‘Turning Point’: What’s Next? – Barclays
Barclays Capital Research argues that the EUR is now close to a turning point, amid accelerating inflation and stronger economic data, though it still faces many near- and long-term threats.
“A rebound from the excessive pricing of political risk for 2017 introduces upside risks to the EUR in the nearterm. However, an already priced tightening by the ECB in 2018, with risks from a downshift in core inflation expected later this year, and the reacceleration of other economies in more advanced cyclical positions, will challenge the EUR’s relative value,” Barclays adds.
Bigger picture, Barclays believes that political risks are likely to weigh on the EUR again in 2018, with many events potentially threatening its very existence such as Italian election and banks, Greek and Portuguese debt.
All in all, Barclays now forecasts EURUSD to depreciate to 1.06 by Q3 17, reaching a bottom in Q4 17 at 1.03, and rebounding to 1.05 by Q1 18.
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