Bank of America Merrill Lynch Research discusses the USD outlook and maintains its view (see here) of tactical upside in the last leg of the USD rally which would take EUR/USD below 1.15 before the pair becomes an attractive buy in the medium-term.
"The balance of risks remains skewed USD bullish over a shorter term horizon, though further out we believe that upside will be constrained. Although fundamentals remain supportive for now, US political risk premium look set to rise as we approach midterm elections. Moreover, global trade policy is likely to remain an important two-way influence on the dollar. Escalation would benefit USD, while de-escalation would hurt it," BofAML argues.
Italy and the discussions of the 2019 budget this fall and trade tensions could offer one last leg to the USD rally, pushing EURUSD below 1.15 again. We argue this would be an opportunity to buy the EUR dip and we forecast EURUSD at 1.20 for next year," BofAML advises.