EUR/USD suffered after an ECB member showed caution regarding a new policy move. Is the correction over? Not so fast.
Here is their view, courtesy of eFXnews:
BTMU FX Strategy Research argues that the latest EUR/USD rally is partly a reaction to an extreme dollar over-valuation fuelled more by extreme monetary accommodation beyond the US than by monetary tightening in the US.
“Hence, the prospect of that ending is resulting in out-sized FX moves like we have had in recent weeks,†BTMU adds.
“Our Short-term Valuation model clearly indicates that EUR/USD has overshot and point to the risk of a short-term correction after the recent sell-off fuelled by increased speculation of a shift in monetary stance ahead.
The EUR/USD overshoot relative to our short-term valuation model illustrates in part the fact that while rates have moved higher in the euro-zone, the same has happened in the US,†BTMU notes.
For lots more FX trades from major banks, sign up to eFXplus
By signing up to eFXplus via the link above, you are directly supporting Forex Crunch.
