Derived Data That Drive Results
Danske Bank outlines its trading strategy for EUR/USD, considering the upcoming European Central Bank (ECB) policy meeting and the Federal Reserve's stance. Despite anticipating a 25 basis point hike in the ECB policy rates, the bank remains bearish on EUR/USD and advises selling any tactical rallies based on the weaker growth fundamentals in the euro area.
Key Points:
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Upcoming ECB Rate Hike: Danske expects the ECB to increase its deposit rate by 25 basis points on September 14, marking a peak rate of 4.00%.
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Fed on Hold: With the Federal Reserve expected to remain on hold, relative rates could provide some short-term support to EUR/USD.
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Weaker Growth Fundamentals in Euro Area: Recent data indicate a softening economic backdrop in the euro area, which underpins Danske's bearish outlook on EUR/USD.
Trading Recommendations:
- Sell Tactical Rallies: While short-term factors might support EUR/USD, Danske recommends selling any tactical rallies in the pair. The bank's strategy is primarily influenced by the weaker growth fundamentals in the euro area.
Implications:
For Traders:
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Beware of Short-Term EUR/USD Strength: While the ECB's likely rate hike and the Fed's pause could provide temporary boosts to EUR/USD, Danske Bank advises that these should be viewed as selling opportunities rather than sustainable uptrends.
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Monitor ECB and Fed Announcements: Upcoming policy meetings from both central banks could create short-term volatility. Traders should stay informed to adapt their strategies accordingly.
For Policymakers:
- Growth Concerns in Euro Area: Policymakers should be cautious about the weakening economic landscape in the euro area, as it has implications for monetary policy decisions.
Conclusion:
Danske Bank anticipates that the ECB will hike rates on September 14, and with the Fed expected to remain on hold, this could provide some short-term support to EUR/USD. However, based on weaker growth fundamentals in the euro area, the bank maintains a bearish view on the pair and advises selling any short-term, tactical rallies.
