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May 03 - 09:55 AM

EUR/USD: In Tandem With Equities; Main Scenario Is For A Bounce Back To 1.21 This Week - Danske

By eFXdata  —  May 03 - 08:30 AM

Danske Research discusses EUR/USD tactical outlook this week, and sees a scope for a move back into 1.21.

"There is little macro news this week and focus will thus turn to 1) the direction of equities as well as 2) Fed speeches. For well over a year, we have seen EUR/USD bounce jointly with equities after days that look similar to what happened on Friday and this week will likely be little different. During Q1, we have seen dollar strength on a more muddled communication from Fed  but we generally view last week's message from Powell as very dovish and hence likely to fuel further broad dollar weakness," Danske notes. 

"This week, we will likely thus turn attention to the handful of Fed speeches which are on wire. Importantly, if communication is muddled and equities remain weak, then EUR/USD spot should head south of 1.20. However, the main scenario is probably to see a new move back to 1.21.

Looking ahead 12M, we expect to see a peak in the reflation theme and with it, for EUR/USD to go back to 1.15 but such turnaround seem unlikely to happen just yet," Danske adds. 

Source:
Danske Research/Market Commentary

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