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Ned Rumpeltin, European head of FX strategy at TD Securities, suggests that with the USD likely to have more to lose in the policy easings to come, we affirm our year-end targets of 1.18 for 2019 and 1.23 for 2020.

Key Quotes

“Despite our constructive outlook, we think the EUR’s move higher will be more of a slow grind rather than a rapid acceleration. In line with this, the current low-vol environment may favour options-based strategies to capture upside potential in EURUSD. Here, we think a 6m EURUSD 1.1570/1.2000 RKO call may offer an attractive risk/reward profile if our base case is realized.”

“The EUR’s still-difficult macro backdrop contributes to our cautious outlook. EUR strength may be tough for some to embrace until the outlook improves. Despite this, however, we think USD longs are looking increasingly stale across the board. With the USD’s carry advantage receding quickly, we see the potential for further gains in EURUSD to be driven by short covering – at least to start.”