BTMU FX Strategy Research notes that there has been some softening of EUR upward momentum as of late suggesting that a lot of good news is already discounted in the near-term.
In addition, BTMU notes that over the past week ECB President Draghi, ECB Chief Economist Praet, and ECB Vice President Constancio all continued to deliver dovish rhetoric which highlights that there is a risk that the market could be getting a little ahead of itself by expecting a more material change in policy.
“It is consistent with the signal from our short-term valuation model that the current spot rate is modestly overshooting key fundamental drivers.
Building US political risks have reinforced US dollar weakness in the near-term. The scope for further US dollar weakness should be dampened by the clear signal form the Fed that it plans to raise rates again in June,” BTMU argues.
In the near-term, BTMU is neutral on EUR/USD targeting EUR/USD in a 1.10-1.14 range.
EUR/USD is trading circa 1.1168 as of writing.
Source: BTMU Research
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