EUR/USD dipped below 1.20 yesterday and is ripe for near-term dip, the cross indeed seems ripe for a correction lower, not least if current euro optimism fades and the Fed keeps March hike expectations alive, suggests Senior Analyst, Jens Nærvig Pedersen at Danske Bank.
“The next focal point for the cross is Thursday’s ECB minutes; good support seen at 1.1902 . US Treasury secretary Mnuchin is said to have asked congress to lift the debt ceiling before 28 February, according to Bloomberg yesterday. That would mean USD liquidity could start to tighten already in March on the back a rebuild of the US Treasury cash balance. Consequently, EURUSD CCS could start to widen again short term from the present relatively tight levels – an additional factor supporting our view above that EUR/USD could dip near term.”
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