We expect the Fed statement on Wednesday to have a hawkish twist while eurozone July CPI due on Thursday falls to 0.4% y/y.
Diverging US/eurozone monetary policy and waning portfolio flows into the eurozone will weigh on the EUR/USD. Heavy positioning and short-term technicals should slow the speed of the downward move.
We maintain our EUR/USD forecasts of 1.35 in one month, 1.33 in three months, 1.30 in six months and 1.26 in 12 months.
Leverage funds should sell EUR/USD, target 1.30, stop-loss 1.37. DKK-based exporters with USD receivables should keep low FX hedge ratios while importers should buy 1Y the USD/DKK call, strike: 5.70, costs: 32 USD pips.
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