Fade occasional strength in EUR/USD – Danske Bank

Occasional bullish attempts in the pair are considered as selling opportunities, noted Arne Rasmussen, Head of FI Research at Danske Bank.

Key Quotes

“EUR/USD has broken key resistance levels in recent days with notably the 200D MA being taken out yesterday in a move below the 1.20 mark. Implied volatility also spiked markedly yesterday after having declined in recent days, and EUR/USD risk reversals are now negative out to the 6M tenor – a clear signal that the volatility market is now increasingly positioning for a breakout of the ranges seen over the past few months”.

“We agree that the USD positives led by a favourable US cyclical position are dominating at present even if we stress that the risk of further upside to oil prices from a dismissal of the Iranian nuclear deal is a potential USD negative. We would consider re-selling EUR/USD for further downside in 1-3M if we see a decent move above 1.20”.