EUR/USD made a move to the topside only to fall and get entrenched in a lower range. What’s next? Here are three opinions:
Here is their view, courtesy of eFXnews:
EUR: 3 Reasons For Further Upside Coming Months; Where To Target? – Credit Suisse
Credit Suisse FX Strategy Research makes the case for further EUR upsidein the coming months mainly on the ground of the following 3 reasons:
1- CS take the view that the French election does not result in a Le Pen victory, allowing for the risk premium still priced into 2m EURUSD implied volatility and risk reversals to be taken out, and for EUR to rally as a result.
2- CS argues that along with the current account support for EUR that is a persistent backdrop, the recent more hawkish ECB tilt, and the fact that global reserve manager allocations to EUR are still near historical lows, this leaves room for more EUR upside.
3- CS is also encouraged by the positive momentum in European equities this year even in the face of the currency’s recent recovery.
In line with this view, CS now targets EUR/USD at 1.10 in 3-month and 1.12 in 12-month.
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EUR: How The Sequence Of ECB Normalization Would Impact EUR? – Nomura
Nomura FX Strategy Research notes that absent French election shocks, ECB policy normalization should be insight.
This, according to Nomura, would be EUR positive, but the impact on EUR crosses may depend on the sequence of normalization
“In G10 FX space, if the ECB tapers and the EUR curve bear steepens, JPY would be the clear underperformer, while an early rate hike would weaken USD, GBP and CAD more. The reaction of European G10 FX will likely be more muted under both scenarios,” Nomura concludes.
EUR: Nor Ready For A Breakout Yet; What’s The Trade? – TD
TD Research comments on the latest EZ inflation data noticing that while the March print missed expectations rising 1.5% oya from 2.0% prior, the data showed some temporary effects related to Easter that could see the data perk up over the coming months.
Still, TD argues that the base effects are fading from some of the headline price indicators, suggesting some pullback in the convergence trade near-term.
The takeaway, according to TD, is that the EUR is not ready for a break of 1.10 with the ECB likely holding steady until June, and with EUR risk premium looks too low ahead of the first round of the French elections.
“EURUSD is testing the 50% retracement level of the 60-day range and break below opens up a move to 1.05. We like buying EURUSD dips there but near-term prefer short EURGBP exposure into the April risk events and would fade the rallies on upside breaks of 0.86,” TD advises.
EUR/USD is trdaing circa 1.0647 and EUR/GBP circa 0.8564.
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