Kristoffer Lomholt, Senior Analyst at Danske Bank, suggested the pair still remains a ‘sell on strength’.
“Following a muted initial reaction to ECB last week, EUR/USD broke key resistance levels including the 2017 high of 1.2092 towards the end of last week as markets digested the impact of a softening euro-zone outlook”.
“A key driver in majors recently has been a seeming recoupling of USD crosses to interest rates, notably 10Y yield spreads. While the US 10Y yield is currently back below the 3% mark, we see potential for support to USD crosses from this factor near term as the US holds a favourable cyclical position amid sustained weakening elsewhere”.
“Positioning should be somewhat lighter now on notably EUR longs, but we continue to see EUR/USD as a tactical sell on rallies near term”.
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