Nordea Research discusses EUR/USD tactical outlook and adopts a bearish bias, preferring to express that via outright shorts in spot targeting a move towards 1.0975.
"In the bigger picture though, the USA is still outperforming like crazy – which is generally good news for the greenback. Forward-looking US growth expectations has come down, but only marginally so. It’s also worth highlighting the usual (disturbing) pattern in the US economic surprise index. It looks to have bottomed this summer, as it usually does, what if it’s ripe to head higher as well? US data usually improves during autumn (at least versus expectations)," Nordea notes.
"While we had hoped for signs of stabilization in the EA by now as a weaker EUR, lower rates, and improving M1 growth has pointed in the direction of improving sentiment, this seems to be more than fully offset by other factors. The list of which is fairly long: i) a struggling banking system (evidenced by weak equity developments), ii) the China/US trade war which may have morphed into Cold War 2.0, iii) looming Brexit risks, iv) Turkey’s shenanigans, v) (still) negative effects for Germany’s car sector stemming from last year’s developments, vi) fears of (falling) water-levels of the Rhine, and vii) a likely upcoming general election in Italy," Nordea adds.