Danske Bank has issued an advisory recommending a bearish stance on EUR/USD in the near term. Citing a stronger US economic outlook and potential risks in the disinflation and soft landing narratives, the bank advises traders to sell EUR/USD on tactical rallies in the coming weeks.
US Economy: Danske Bank argues that the American economy is currently on a better footing than its European counterpart, fueling a general USD appreciation trend.
Disinflation Risks: The bank also cautions that there are risks tied to the prevailing disinflation and "soft landing" narratives, indicating that the market could be underestimating inflationary pressures and other economic challenges.
Bearish on EUR/USD: Based on these factors, Danske Bank maintains a bearish outlook on the EUR/USD pair.
Tactical Rallies: The bank suggests that the near-term is likely to offer tactical rallies in EUR/USD, which they recommend should be opportunities for selling rather than buying.
For Traders and Investors:
Market Timing: Danske Bank's bearish outlook suggests that traders might want to time their short positions in EUR/USD to coincide with tactical rallies, thereby potentially maximizing their returns.
Risk Assessment: Traders should be aware of the risks tied to the prevailing disinflation and soft landing narratives. If these narratives don't hold, the USD could strengthen even more than anticipated.
Strategic Positioning: For those with a more strategic outlook, the bearish stance on EUR/USD could inform longer-term trading decisions.
Danske Bank holds a bearish outlook on the EUR/USD pair, recommending selling on rallies in the coming weeks. With the US economy outperforming the Eurozone and question marks over prevailing economic narratives, the bank's advice could be useful for traders and investors looking to optimize their position in this major currency pair.