EUR/USD remains entrenched in a narrow range and fails to move after the downfall. Here are three opinions about the next moves in euro/dollar:
Here is their view, courtesy of eFXnews:
EUR/USD: What Now?: Assessing 3 Scenarios & 3 Wild Cards – Danske
Danske Bank FX Strategy Research reassess its outlook for EUR/USD in light of the following positive/negative factors for the year ahead:
“-#1: Fed to become less accommodative but market pricing remains substantially below FOMC dots beyond 2017; moreover, USD liquidity is set to tighten again >> EUR/USD negative.”
-#2: ECB to scrap exit discussions and extend QE (delivering no deposit-rate hike) as a drop in inflation ahead will increase the pressure for more easing >> EUR/USD negative.
-3: Fundamentals such as valuation and current-account balances remain supportive >> EUR/USD positive.”
Wildcards: Danske keep an eye on the following wild card:
“∙#1. What if the ECB lifts rates before end of QE? ∙
#2. What if Le Pen wins the French election? ∙
#3. What if ‘Trumponomics’ returns with a vengeance?,”
All in, Danske expects EUR/USD within the 1.04-1.10 on a 1-3M horizon with downside risks dominating near term but upside potential remaining longer term.
EUR/USD is trading circa 1.0680 as of writing call.
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EUR/USD: Cautious Tone Into French Election Before Resuming Rally Towards 1.14 – CIBC
CIBC World Markets Research argues that if not for electoral uncertainty in the Eurozone, the EUR would likely already be more expensive.
As such, CIBC expects the the cautious tone surrounding the euro is likely to remain until after the French elections before resuming its rally.
“Macroeconomic dynamics should soon come back into focus with political risk expected to dissipate. Survey data suggest that growth dynamics are gaining momentum, despite the near-term effect of lower oil prices on headline inflation. So, barring an electoral surprise, the ECB should be ready to pull back further or end bond buying next year,” CIBC notes.
CIBC targets EUR/USD at 1.10, 1.12, and 1.14 by the end of Q2, Q3, and Q4 respectively.
EUR/USD: A Sell On A Rally Into 1.09: 4 Reasons – BNPP
BNP Paribas FX Strategy Research argues that USD appreciation vs the EUR remains strong in Q2, and continues to favor adding to USD longs on weakness.
In particular, BNPP recommends selling EUR/USD on approaches to 1.09 on the ground of the following 4 factors:
1- BNPP argues that while one should never expect the legislative process in the US to move quickly or in a straight line, meaningful tax reform is still expected by the end of this year.
2- BNPP notes that even without implementation of new fiscal measures, US economic performance has remained strong.
3- BNPP notes that markets may be overestimating the significance of recent indications that the ECB is moving towards removing stimulus.
4- Finally, BNPP’s analysis for the combining of the EUR and USD positions indicators shows a net long EURUSD exposure close to what was observed in early February when markets were pricing in little chance of a Fed rate hike in March.
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