EUR/USD: 3 Reasons Why Gains To Be Capped At 1.15

0

EUR/USD extends its rises and has already reached the next line of resistance at 1.1420. Draghi is in the driver seat. What’s next?

Here is their view, courtesy of eFXnews:

Credit Suisse FX Strategy Research prefers to keep its EUR/USD forecasts unchanged at 1.15 in Q3, irrespective of yesterday’s hawkish comments from ECB’s Draghi.

CS outlines 3 reasons behind this call:

1. “Draghi’s comments were not as unequivocal as we describe above. He described inflation forces as “not yet durable and self-sustaining,” suggesting that policy support is still needed. This likely limits both the pace and scope of exceptional policy withdrawal and also limits the tolerance for persistent EUR strength

2. European equities are relatively heavy, with Euro Stoxx 50 around 3.5% off its May highs and down on the day yesterday. The EUR rally would feel more durable if it were coincident with rising euro area asset prices.

3. Long EUR is still a negative carry trade in the large majority of cases,” CS argues.

We note that EURUSD has failed to close above 1.15 in any week since early January 2015, and indeed has only traded above that level in two weeks since then.

As such, the bar is set high for establishing itself above our target level, especially as not all indicators validate the idea that it should do so,” CS concludes.

For lots more FX trades from major banks, sign up to eFXplus

By signing up to eFXplus via the link above, you are directly supporting Forex Crunch.

Get the 5 most predictable currency pairs

About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

Comments are closed.