something interesting

<  BACK TO Market Analysis

EUR/USD: Time to fly high?

Jane Foley, Senior FX Strategist at Rabobank, explains that current trends would imply that there are upside risk for EUR/USD beyond their 1.12 one year target but, in view of the risks and the exceptional amount of volatility, Rabobank will hold off from making revisions just yet.

Key Quotes

“On May 12 the FT reported that investors had poured a record USD6 bln of new capital into European stock funds during the previous week.  This ferocious appetite for European assets was also demonstrated in the CFTC speculators’ positioning data which last week recorded a net positive position for the EUR for the first time in 3 years.  The trigger for the better tone was news that Le Pen had failed in her attempt to win the French Presidency.  This brought a flood of relief that populist tendencies had, at least for the time being, been overcome by liberal governments in Europe.”

“Feeding the better tone has been the acknowledgement that the Eurozone economy is performing at better levels that had been generally forecast at the start of the year.  This improvement in perceived economic fundamentals in the Eurozone has come at a time when the Trump Administration has become bogged down by scandal. It also follows a bout of mixed economic data in the US.  A reversal to expectations regarding the Trump reflationary trade may have been the source of the recent softening in the USD.  However, in our view the coincident improvement in the EUR’s outlook has been a catalyst for the softer tone of the greenback.”

“However, the Eurozone boasts a huge current account surplus (around EUR37 bln sa in Mar) which can mean the EUR displays quasi safe haven qualities from time to time.”

“The level of net long USD positions had fallen back to levels last seen in early November 2016 – a time when Clinton was expected to take the White House.  A similar picture is demonstrated by the US effective exchange rate, which has given back the gains made in the final weeks of 2016.  Our view that the US market had priced in too much reflation at the end of last year combined with the likelihood of a relief rally for the EUR after the French Presidential election were key factors behind our relatively bullish forecast for EUR/USD this year.  Our target of EUR/USD1.10 has now been surpassed and our 12 mth forecast of EUR/USD1.12 is already in view. That said, we have so far been slow to push these expectations up another notch.”

“Political risk and economic uncertainty

From the point of view of the EUR, the Italian election (which has to be held by May 2018) could bring another surge of populism to the shores of Europe.  If France’s Macron fails to win a parliamentary majority next month, fears that his reform agenda could stall could also reduce enthusiasm for the EUR. There is also the risk that the market will be disappointed if the ECB maintains a dovish tone at the June 8 policy meeting in respect of still relatively soft core CPI inflation and wage growth in the region.  With respect to the greenback, there is speculation that the Federal Reserve is keen to outline a plan regarding how it intends to tackle balance sheet reduction ahead of the end of Yellen’s term as Fed Chair next spring.”

Source: fxstreet.com

Jane Foley, Senior FX Strategist at Rabobank, explains that current trends would imply that there are upside risk for EUR/USD beyond their 1.12 one year target but, in view of the risks and the exceptional amount of volatility, Rabobank will hold off from making revisions just yet.

Key Quotes

“On May 12 the FT reported that investors had poured a record USD6 bln of new capital into European stock funds during the previous week.  This ferocious appetite for European assets was also demonstrated in the CFTC speculators’ positioning data which last week recorded a net positive position for the EUR for the first time in 3 years.  The trigger for the better tone was news that Le Pen had failed in her attempt to win the French Presidency.  This brought a flood of relief that populist tendencies had, at least for the time being, been overcome by liberal governments in Europe.”

“Feeding the better tone has been the acknowledgement that the Eurozone economy is performing at better levels that had been generally forecast at the start of the year.  This improvement in perceived economic fundamentals in the Eurozone has come at a time when the Trump Administration has become bogged down by scandal. It also follows a bout of mixed economic data in the US.  A reversal to expectations regarding the Trump reflationary trade may have been the source of the recent softening in the USD.  However, in our view the coincident improvement in the EUR’s outlook has been a catalyst for the softer tone of the greenback.”

“However, the Eurozone boasts a huge current account surplus (around EUR37 bln sa in Mar) which can mean the EUR displays quasi safe haven qualities from time to time.”

“The level of net long USD positions had fallen back to levels last seen in early November 2016 – a time when Clinton was expected to take the White House.  A similar picture is demonstrated by the US effective exchange rate, which has given back the gains made in the final weeks of 2016.  Our view that the US market had priced in too much reflation at the end of last year combined with the likelihood of a relief rally for the EUR after the French Presidential election were key factors behind our relatively bullish forecast for EUR/USD this year.  Our target of EUR/USD1.10 has now been surpassed and our 12 mth forecast of EUR/USD1.12 is already in view. That said, we have so far been slow to push these expectations up another notch.”

“Political risk and economic uncertainty

From the point of view of the EUR, the Italian election (which has to be held by May 2018) could bring another surge of populism to the shores of Europe.  If France’s Macron fails to win a parliamentary majority next month, fears that his reform agenda could stall could also reduce enthusiasm for the EUR. There is also the risk that the market will be disappointed if the ECB maintains a dovish tone at the June 8 policy meeting in respect of still relatively soft core CPI inflation and wage growth in the region.  With respect to the greenback, there is speculation that the Federal Reserve is keen to outline a plan regarding how it intends to tackle balance sheet reduction ahead of the end of Yellen’s term as Fed Chair next spring.”

Source: fxstreet.com

lastest Articles

Market Analysis
FOMC: All eyes on Chair Powell’s press conference – Deutsche Bank
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD prints YTD lows near 1.1015 post-IFO
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Coronavirus crisis accelerates and knocks down risk, focus on German IFO
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Week Ahead – Central banks back to the fore
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Breaking: EUR/USD hits fresh highs as German Preliminary Manufacturing PMI beats estimates with 45.2
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Markets take a break from coronavirus fears, forward-looking data eyed
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
ECB’s Lagarde: To think that policy is on auto-pilot is ridiculous
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Higher USD/JPY is still on the cards – UOB
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Euro May Fall as the ECB Stays Cautious Despite Economic Upturn
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Coronavirus fears spread and weigh on markets, Aussie surges, all eyes on the ECB
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Euro Under Dark Clouds as Trump Threatens Auto Tariffs
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Stocks in Asia rise, mostly shrug off concerns over coronavirus
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
BOE Preview: Goodbye Carney, hello rate cut? - Nordea
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
President Trump’s speech at WEF in Davos – Live
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Fed should turn to digital money to combat next recession
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
GBP/USD jumps to session tops, closer to mid-1.3000s on upbeat UK jobs data
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD Forecast: Bears now await a break below 1.1065 confluence support
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Pound pressured by Brexit plans, oil bumps on Mod-East issues, Bitcoin hungover
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
ECB preview: It’s all about the strategy – ING
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Week Ahead - BOJ, BOC, and ECB to keep rates on hold as markets focus on global PMI readings and earnings
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
US: Industrial production to retreat again in December – TDS
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
European stocks aim at fresh record on China data and Wall Street’s optimism
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Breaking: GBP/USD drops below 1.3100 after UK Retail Sales drop 0.6% MoM in Dec vs. +0.7% expected
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Crude Oil Futures: deeper pullback loses traction
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD prints weekly highs above 1.1160 ahead of ECB, data
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Mixed feelings about the trade deal, US retail sales eyed, cryptos consolidate
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Gold Futures: further signs of consolidation
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Crude Oil Futures: an interim low seems in place
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Tariffs weigh on markets, pound recovers ahead of data, Bitcoin takes a breather
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD Price Analysis: Focus remains on the 200-day SMA near 1.1140
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
US: Focus on Fed speak and CPI today – Rabobank
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Trade optimism sends USD/JPY above 110, cryptos climb, US inflation eyed
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Week ahead – It’s a trade deal!
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Company News
The WAIT Is Over
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
BOE’s Tenreyro: UK labor market is not tightening further, GBP/USD drops 20-pips
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD stays cautious near 1.1100 ahead of Payrolls
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
AUD/USD pares early gains, turns red near 0.6860
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Gold drops to fresh weekly lows, around $1540 level
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Sell-offs in gold, oil and Bitcoin following Mid-East calm, central bankers eyed
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
GBP/JPY Technical Analysis: Bulls struggling near 141.20-30 confluence support
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Gold hits fresh multi-month tops, around $1545 region
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Fear grips markets as US kills top Iranian commander, ISM, FOMC awaited
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
GBP/USD: Recovery mode intact on 1.32 after UK Final Dec Manufacturing PMI disappoints with 47.5
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
AUD/USD: Weaker around 0.7000 as USD recovers
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD: Bulls look to test multi-month highs near 1.1240
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
PAMM News
PAMMs Yearly Update
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
USD/CAD struggles to shakes off bearish pressure, trades around 1.3070
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: EUR/USD tops 1.12, AUD/USD nears 0.70, as end-of-year dollar pressure set to extend
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Week Ahead: Market Rally Still Going Low Holiday Volumes Awaiting Start of 2020
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Company News
Merry Christmas
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Canada: Weakness in consumer spending continues – RBC
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Gold outshines amid trade deal woes in Christmas Eve markets
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD: Bounce still capped below 1.1100 ahead of US data
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Pre-Chirstmas quiet trading seeps in alongside US-China trade optimism, US data eyed
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Asian stocks: Political pessimism weighs over US-China trade progress
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Week Ahead: Market in Holiday Mode Despite Impeachment and Brexit
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Company News
Christmas and New Year Trading Schedule
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
GBP/USD: Supported here?
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD: More downside? – Commerzbank
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
China's Premier Li: Pressure on China's economy could be even bigger next year
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
BOJ’s Kuroda: Will continue to closely watch developments of US-China trade talks
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Trump’s Forex Today: Trump’s impeachment caps dollar gains, Aussie jobs boost AUD; focus on BOE, Brexit drama
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/GBP: Capped here – Commerzbank
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Former ECB Head Draghi: Central banks must be ready to use all tools in their mandate
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Brexit redux and trade fears continue to hurt risk appetite, favor dollar
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
BOJ's next move is to dial back stimulus - Reuters poll
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD off lows, still below 1.1150 amid USD comeback
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Fresh Brexit risks pound GBP, Aussie hit by RBA; UK jobs next of note
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Powell punches dollar, Boris' judgment day, Trump's tariffs decision, Lagarde's ECB debut
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD: On a high – Commerzbank
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Gold sidelined near $1465 level, FOMC awaited
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Fed may cut once more – Danske Bank
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Shirking majority for Johnson, Fed to stand pat through 2020?
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Week Ahead – The UK election is upon us
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
USD/JPY Technical Analysis: Bears challenge 50-DMA, ascending trend-line confluence support
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD sidelined around 1.1100 ahead of key US data
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Happy Friday for trade talks, GBP/USD holding onto Boris boost, all eyes on the NFP
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
OPEC+ said to discuss deeper oil cuts – RTRS
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Gold holds steady near $1475, weaker USD lends some support
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Kiwi lifted by RBNZ amid cautious optimism; eyes on OPEC+ meet, trade
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Asia: PMIs back in expansion territory – TDS
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD stays firm near 1.1100, looks to data
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
BoC Preview: Major Banks expecting BoC to hold fire today
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
US: Mixed manufacturing data – Deutsche Bank
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Gold: Back in the red around $ 1460 amid USD comeback
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Trump's tariffs weigh on USD before meeting Boris, AUD surges, EUR rising
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Australia: Dwelling approvals weaken – Westpac
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
UK Industry: Brexit, weak global demand to hurt UK in 2020
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: China lifts mood, Boris and Merkel in trouble, critical data kicks off December
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Week Ahead - Market Awaits China Retaliation on Trade
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
BOJ’s Kuroda: Not thinking of further easing at present
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD looks for direction near 1.10 ahead of key data
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Soggy Black Friday mood, GBP/USD retreats, EZ inflation awaited
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
AUD/USD struggles near multi-week lows, just above mid-0.6700s
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
ECB’s Villeroy: Brexit uncertainty likely to last for at least some quarters in the future
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Sterling surges as poll backs Boris, dollar bulls thankful, Trump angers China
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
If Trump refuses to roll back tariffs, loss to American farmers could be permanent – Global Times
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
EUR/USD is offered near term – Commerzbank
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
Forex Today: Massive pre-holiday US data dump, Trump holding back deal, critical UK poll eyed
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613
Market Analysis
UK: Disorderly Brexit comes off the table – ABN AMRO
https://secure.gravatar.com/avatar/b23a9c274f4a28b6ab7acddb98b80613