EUR/USD poised for further rangebound between 1.06/1.10 – Danske Bank

EUR/USD is expected to consolidate between 1.06 and 1.10 in the near term, according to Senior Analyst at Danske Bank Jens Pedersen.

Key Quotes

“EUR/USD edged slightly lower and below the 1.09 level on the somewhat dull FOMC statement which notably did not include any new hints on ‘quantitative tightening’.

“Thus the Fed has yet to test FX market sensitivity to this issue for real. Indeed, the combination of the Fed shrinking its balance sheet and hiking will be a challenge communication-wise insofar as the Fed wishes to avoid swift tightening of financial conditions including a stronger USD”.

“For EUR/USD, focus in the coming months will be on both Fed and the ECB adopting slightly less accommodative stances, i.e. Fed addressing its reinvestment policy and delivering another hike while, at the same time, the ECB is likely to amend its introductory statement to signal that rates will not go lower from here”.

“We still look for the cross to stick – by and largely – to the 1.06-1.10 range in 1-3M. Near term, the next focal point for USD crosses will be Friday’s job report where we see a risk of somewhat downbeat readings on both payrolls and earnings; should this hold true, it could – coupled with a muted relief rally in the cross on a Macron win – lead EUR/USD to test the 1.10 level, however”.