Synopsis:

Danske expects this week’s FOMC meeting to have limited FX impact, with the USD hovering near multi-year lows. The bank maintains a tactical buy-on-dips strategy for EUR/USD and sees continued structural headwinds for the dollar.

Key Points:

• FOMC meeting expected to be quiet:
  No major policy shifts are expected from the Fed this week, and market reaction may be muted as traders await clearer macro signals.

• USD at multi-year lows:
  The DXY has stabilized near a three-year low, reflecting ongoing concerns over US economic momentum and political uncertainty.

• Shift in asset allocation:
  Capital rotation out of the US is seen as a growing theme, adding medium-term downside pressure on the greenback.

• EUR/USD strategy and outlook:
  Danske continues to buy EUR/USD on dips, with a year-end target of 1.20, supported by their bearish structural USD view.

Conclusion:

Danske views the current dollar consolidation as temporary and remains confident in further EUR/USD upside. With the FOMC likely to be uneventful, they favor building long EUR/USD positions on pullbacks, aiming for a gradual grind toward 1.20 into year-end.