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The euro enjoyed a sigh of relief as Catalonia refrained from a clear declaration of independence and the consequent response from Madrid. Is EUR/USD ready to rally?

Here is their view, courtesy of eFXnews:

EUR/USD: Is EUR out of the Catalan woods? What’s The Trade? – Credit Agricole

Credit Agricole CIB FX Strategy Research discusses the EUR outlook following the temporary suspension of the Catalan independence referendum results yesterday.

“In all, we believe that yesterday’s decision may take the edge off the “Catalan independence drama” to a degree and may even transform it into a drawn-out  negotiation process.

While the political cloud has not been lifted completely,  the skies are brightening up and this could offer some support for EUR. We continue to expect more EUR upside vs USD, JPY and CHF from here,” CACIB argues.

In line with this view,  CACIB  maintains a  long EUR/USD* position targeting a move towards 1.22.

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EUR/USD: Holding Up Well In Light Of Recent Developments; What’s Next? – BTMU

BTMU FX Strategy Research notes that the latest  political developments in Europe are having only a limited  impact on the  EUR.

“The recent pullback for EUR/USD after it failed to clearly break back above the 1.2000-level has been only modest.  The limited negative euro reaction so far appears reasonable to us at this current juncture.

So far there appears to have been little impact on Spanish government bonds. The 10-year yield spread between Spanish and German government bonds is still broadly in line with its average over the last couple of months,” BTMU argues.

In line with this view, BTMU expects that any  EUR/USD downside to be limited to 1.1550  in the near-term.

EUR: A Start Of 2-Weeks Window Of EUR Rally; What’s The Trade? – ING

ING FX Strategy Research argues that  the window of opportunity for an ECB-led rally may now be open  following the move by Catalan leader Puigdemont to ‘suspend’ the Catalan referendum result.

“We have seen a trivial relief rally in the EUR and think that  this may just be the start of a two-week window of EUR strength ahead of the big Oct ECB meeting.

While political uncertainty hasn’t fully faded, we see the focus for the currency turning back to the positive cyclical EZ economic story and prospects of a more hawkish ECB QE taper announcement later this month. Certainly our house view for a drop to €20-25bn monthly QE purchases from Jan-18 (albeit for slightly longer) could see a one-off move higher in EUR pairs,” ING argues.

Position-wise, ING likes long EUR/USD  targeting 1.20, EUR/JPY targeting 135, and  long EUR/CHF   targeting 1.17.

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