EUR/USD dropped from the highs as fears about the euro-zone grew. What’s next? The ECB is in focus.
Here is their view, courtesy of eFXdata:
Danske Research discusses its expectations for next week’s ECB policy meeting.
“With no new policy signals expected next week, we stick to our three-stage rocket to orbit view for the EUR/USD. (see here) We have long been hinting that the next big move in EUR/USD will be higher on valuation grounds but stress that a rebound is a three-stage-rocket – and Fed ‘on hold’ is only the first stage to orbit.
With the break of October 2018 highs justified based on higher long real yield spread, EUR/USD ranges have moved higher with 1.15 now more likely to be the midpoint going forward. As Q1 progresses, we expect the second stage to be reached and 1.20 to be in sight,’ Dankse argues.
“Furthermore, we note that even though the EUR/USD has range-traded recently, the effective EUR has shown signs of weakening on a broader scale. In the past few months, the year-on-year appreciation pace has fallen markedly and is now up by only 0.5% y/y (from 10% y/y in October 2018). In our view, a weaker euro is good for the ECB and its narrative,” Danske adds.
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