In reaction to ECB’s recent flirt with stimulus exit talk, Danske Bank FX Strategy argued that as the ECB has let the genie out of the bottle for EUR/USD, it’s unlikely to expect any substantial dip in the cross near term (see here).
Danske still holds this view but notes that speculators are now net long EUR/USD which suggests risks are on the downside for the cross near term.
“That said, we emphasise that any dips in the EUR/USD are likely to prove shallow and short-lived. Thus, we continue to see the cross in a range of plus/minus a few big figures around 1.13 on a 1-3M horizon,” Danske argues.
“In our view, EUR/USD has the potential to rise towards the 1.20s as Fed-ECB divergence fades but the next move from current levels to, say,1.20 will be more ‘demanding’ than the one from below 1.04 to 1.14 seen in H1,” Danske adds.
Source: Danske Bank Research
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