EUR/USD hugging 1.14 – break up or break down?

EUR/USD started the new week in the same place it ended the previous one, around 1.14 and not going anywhere fast. What’s next? Here are a few opinions:

Here is their view, courtesy of eFXnews:

EUR/USD: Monitoring ECB Reaction On A Move Above 1.15; Looking For A S/T Correction – Nordea

Nordea FX Strategy Research notes that with EUR/USD currently almost 5% higher than ECB assumed in June, and the trade-weighted EUR roughly 3% stronger, it will be interesting to see if any ECB officials comment on the currency.

ECB Coeure has done so around 1.15 in recent years. If not, a move above 1.15 could augur a shift towards 1.18-1.20,” Noreda argues.

In the long-term, Nordea remains constructive on the EUR but thinks a short-term correction lower in EUR/USD is due before resuming its underlying upward trend. 

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EUR: Expect Some Profit-Taking N-Term Before Another Leg Higher – CIBC

CIBC FX Strategy Research remains structurally bullish on the EUR on the back of the ECB likely move to start winding down stimulus as the economy improves.

However, in the near-term CIBC notes that the one factor that appears to have stalled the currency’s appreciation is positioning, which has already swung significantly.

“While net long positions aren’t anywhere near as extreme as the shorts saw in prior years, they are at the top end of the range observed even before the financial crisis,” CIBC adds.

As such, Nordea remains bullish on EUR long-term but expects that some profit taking could be seen before another leg higher begins.

EUR: Looking To Fade Rates-Induced EUR/USD Rally At Current Levels – Barclays

Barclays Capital FX Strategy Research sees the recent sell-off in European rates as nearly done and looks to fade the rates-induced EUR/USD rally at current levels.

In particular, Barclays argues that while there may still be some room for the European sell-off to continue, as positioning still seems to be the wrong way around, risky assets and spread products are holding up well, thereby limiting flight-to-safety moves for now.

“A stabilization in European rates will likely imply a toppish pattern for EURUSD, and we see scope for a gradual retracement towards our H2 17 forecast of 1.10,” Barclays adds.

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