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Aug 25 - 09:55 AM

EUR/USD: Towards 1.16; USD/JPY: Towards 107-110 Range N-Term - Danske

By eFXdata  —  Aug 25 - 08:35 AM

Danske Research discusses its outlook for EUR/USD and USD/JPY.

"Our main scenario is that optimism towards EU economic outperformance remains elusive and thus, this time is not different. This will likely take EUR/USD quite a bit lower and we keep our forecast unchanged. We therefor target 1.16 in 1M and 3M and 1.12 in 6M and 12M. In our view, markets have priced a closing of the productivity gap vis-à-vis US but we do not expect this to materialize. Thus, risks are tilted to the downside from what in our view are quite elevated levels of EUR/USD," Danske notes. 

"We continue to expect 112 in 6M and 12M (unchanged), which still reflects our view of a strong USD. EUR/JPY has seen a sudden resurgence based on renewed EUR optimism over May and June. Near term, we see USD/JPY as trading in 107-110 range. Do note that over recent months, we have seen the USD leg dominate price action in the cross. Thus, declining broad USD takes USD/JPY lower, rather than higher which one would normally have expected due to the effects of rising commodities and yields in a ‘risk-on’ scenario," Danske adds. 

Source:
Danske Research/Market Commentary

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