Danske Bank FX Strategy Research notes that while the latest uptick in EUR/USD has not been shadowed by relative interest rates, unhedged equity and speculative flows appear to have played a key role.
"While these flows may be fading near term and a softly priced Fed could provide USD support, we maintain that any dips in EUR/USD should be shallow and short-lived as fundamentals still provide support, and as notably a reversal in debt flows is a key source of upside risks for the cross.
In our view, recent price action and flow patterns have confirmed that flows are a key driver in the current ‘normalisation’ environment," Danske argues.
Near term, Danske sees EUR/USD trading around the 1.20 level and has upped its 3M, 6M, and 12M forecasts to 1.19. 1.22 , and 1.25 respectively.
Source: Danske Bank ResearchOriginal Article
