TD Research discusses the USD outlook and sees a scope for EUR/USD to consolidate in 1.18-122 range in the near-term.
"The USD rally has paused a bit, but much of the damage has been done. The major question is how much harm the Fed has done to the reflation trade. In the medium-run, we don't think the Fed has derailed it, reflecting the fact that there's quite a bit of runway between the discussion of tapering, tapering itself, and a rate hike. Accordingly, this pullback could offer a chance to buy the reflation dips through Q3," TD notes.
"We expect more USD upside through the summer, reflecting more two-way market risk, a repricing of Fed risks, and a bit less global reflation. A possible repeat of the price action seen in Q1. That implies a 1.18-1.22 range in EURUSD while we continue to like CADJPY downside as a risk drawdown hedge," TD adds.