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The US dollar has staged a nice recovery thanks to the upbeat retail sales report and EUR/USD dipped its feet under 1.17. What’s next?

Here is their view, courtesy of eFXnews:

Citi Research argues that in the short term, the USD will likely remains restrained  on a combination of a broadening of the economic expansion to Europe, EM and Japan and disappointment about policy action from the new US Administration may restrain USD.

In the medium and long term, we do expect to see tax cuts emerge in the US, giving a moderate stimulus to a somewhat flagging US economy and a boost to yields and USD. This implies  a modest recovery  in USD over 6-12 months,” Citi adds.

On  EUR/USD,  Citi argues that since the RSI retreated from overbought levels,  upside may be limited at 1.2043, with support at 1.1616.  

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