Danske Research discusses EUR/USD outlook and expects a dip back towards 1.10 in EUR/USD on 1-3M on yet another Fed disappointment in September.
"While it is difficult to predict whether the currency manipulator twist will continue over the coming weeks, the moves yesterday do provide a blue print of how to expect markets to react to such news. On the latter, Fed’s Bullard, a notorious dove, struck a hesitant tone on the need for further monetary easing despite the recent escalation in the trade war and deterioration in market sentiment," Danske notes.
"In that light, the market pricing about 30% chance of a 50bp Fed cut in September looks a bit aggressive and the recently added speculative short positions in EUR/USD look to be on safe ground for now.
We see a potential for a dip back towards 1.10 in EUR/USD on 1-3M on yet another Fed disappointment in September," Dankse adds.