TD Research discusses EUR/USD outlook and maintains its preference to stay sidelined in cash and engage via options instead.
"We still think the 1.1500 level curbs the downside. We still look to capture more upside, especially on the risks around the USD.
This week we discussed the EUR from a valuation, positioning and a macro level, so wanted to highlight a few key takeaways. The BTP premium has already started to get worked out, with our HFFV model running at 1.1740 when you account for the BTP spread. Without, it sits north of 1.20. Positioning is clear to us as well as macro funds and CTAs appear to be short the EUR. On the macro side, we continue to focus on the medium-term valuation story, alongside the gradual normalization of monpol," TD argues.