Appreciation of the EUR has unnerved the ECB and the Central Bank has signalled that it is ready to act as early as June, notes Nordea Markets.
Revising forecasts:
“This is also our economists’ call now. We have revised our 3M EURUSD forecast from 1.38 down to 1.36. While a repo rate cut, all things equal, would put EUR under pressure, a real game changer for the EURUSD would still be a sentiment shift in the global markets, resulting in wider credit spreads and higher volatilities. Something we do not envision in the near term.” Nordea argues.
“Thus, if Draghi is bluffing about the likely rate action, expect a rebound in EURUSD – potentially a larger one than the post-ECB meeting drop,” Nordea adds.
How it trade from here?
“Short term, technically the uptrend has been challenged with the EURUSD crossing 1.3730. We recommend re-entering long positions only when/if above this level again, where another run for the 1.40 is likely. The EURUSD crossing the 200D MA at around 1.3640, however, would be a game changer,” Nordea advises.
