EUR/USD is certainly already on the move, thanks to the big dollar dive. To be fair, this assessment from Danske was released before the move. Here is their reasoning:
Here is their view, courtesy of eFXnews:
One argument for a lower EUR/USD:
– Relative rates: still in favour of USD…
…but several arguments for a higher EUR/USD:
Valuation: EUR/USD is substantially undervalued
External balances: The EU/US CA differential is at its widest level since 2004-06
Cyclicals: the Eurozone’s business cycle looks stronger than the US cycle
Positioning: speculators are stretched short EUR/USD > impact of relative rates fading
Terms of trade: ’lower oil for longer’ has become a EUR positive
Hedging flows: commercials FX hedging of EUR set to fall, which should support EUR/USD
Now is the time to prepare for a higher EUR/USD: We recommend investors have long EUR exposure. We recommended to buy EUR/USD 12M bullish seagull.
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