What is the bias in favour of the U. s. dollar, specifically the USD/CAD, EUR/USD?
Here is their view, courtesy of eFXdata:
Danske Bank Research however, the USD/CAD pair of shorts, on the improvement of the risk sentiment and sees the EUR/USD is the end-this-week-in-a-1.09-1.10 range.
“While U.S.-China tensions and the talk of negative rates or not), may be the key FX drivers in the short term, the corona virus, the FX of the legacy medium-term remains the key element of the shows. How different countries unwind crisis measures and how, if at all, to more permanent facilities are in place, will be decisive for how natural and technologies will evolve.
The Natural rate will shift slowly over time, but in the meantime, short USD/CAD looks like an attractive recovery betit : we do not see the case for a clear drift in the natural rate of spread, but the spot has been running-away-from-the-spread, both in the course of the last decade, and in the face of the COVID-19 “shock – plus” – the cross is overvalued on the fundamentals, according to our MEVA model,” Danish notes.
“In addition, with the EUR/USD may be at risk of renewed divergence of natural rate, in favor of the US if the investment/growth opportunities, in a broad sense, continue to outpace European peers. This suggests that the EUR/USD could very well be the end of the week, in the 1.09-1.10 range and remain cautiously optimistic about the short-term upside risk,” Danish adds.
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