Danske Research remains agnostic about EUR/USD direction over the coming 3 months and likes selling volatility via call spreads if the pair move towards or above 1.20.
"On two occasions we have seen a significant rally, out of stay-at-home stocks (the growth factor) and into classical sectors such as airlines, banks and autos (the value factor). Both times, we have seen the EUR lower. EU budget talks are also heating up, contrary to news last week, and the ECB continues to water down expectations, while the Chinese credit cycle seems to be peaking," Danske notes.
"On net, we remain agnostic about EUR/USD’s direction on a 3M view but we increase conviction that optimism will fizzle out and have lowered our 12M forecast for the second time since the Fed’s vague commitment to average inflation targeting," Danske adds.