TD Research discusses EUR/USD and EUR/CHF outlook and prefers long exposure in cash in EUR/CHF from a risk-reward perspective.
"Alongside higher oil and the outlook for global rates, the next move in BTPs should dictate the outlook for EURUSD. We believe the ranges will hold, mostly because real money seems to be buying into the dips and European assets look attractive after months of a solid drubbing. Real money accounts are likely to cut ties on long EUR exposure on a convincing break of 1.13, leaving it a buy on dips for now," TD argues.
Indeed, Italian risks are better anticipated than trying to push a momentum trade as peripheral spikes tend to mean-revert over the short-run. We also note that Italy remains a local issue and EURCHF remains supported despite the fixation on Italy.
"Given the dislocations in CHF pricing on our dashboard, we think playing for strength in EURCHF offers better risk-reward than EURUSD in cash," TD advises.