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EUR/USD remains vulnerable ahead of FOMC – Danske Bank

FXStreet (Edinburgh) - Analyst Kristoffer Lomholt at Danske Bank sees the pair remains under pressure in light of the upcoming FOMC gathering.

Key Quotes

“The EUR/USD move lower has lost steam, which is likely to be a combined result of reduced risk appetite as people await the FOMC and profit taking after the significant dip in the past few days”.

“Indeed, according to IMM positioning data, bearish EUR/USD bets were significantly short-covered prior to ECB and consequently we expect the re-adding of these bets to have increased the magnitude of the move lower”.

“However, as we have seen earlier, stretched short EUR/USD positioning limits the cross’s downside sensitivity to relative rates. We expect short covering to be a contributing factor in lifting the cross from our 3M forecast low of 1.08 towards 1.20 in 12M as EUR inflation and the importance of medium-term fundamentals rise”.

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