EUR/USD would keep its rangebound pattern – Danske Bank

Chief Analyst at Danske Bank Allan von Mehren expects the pair to remain in a consolidative note in the near term.

Key Quotes

“The major focus in FX markets today will be Yellen’s speech and whether she will give any hints about future rate hikes”.

“While she is unlikely to talk directly about current monetary policy, she may well give her verdict on the strength of the US economy and hence implicitly indicate whether a rate hike would be warranted”.

“Despite the market increasingly pricing in a rate hike (now 30%, up from 15% two weeks ago), the EUR/USD has been trading in a relatively tight range of 1.125-1.135. We don’t think the cross will break free of that range today, unless Yellen comes out either very dovish or hawkish, which is unlikely, in our view”.

“However, the market positioning is relatively close to stretched long-dollar territory, which, if anything, reduces downside risk for the cross in relation to relative higher central bank rates in the US vs. the euro zone”.