Economists at ING discuss the USD outlook for this quarter and the possible range of trading for the EUR/USD and USD/JPY.

Dollar rangebound for the rest of this quarter

“The 2-10 year US Treasury curve remains as inverted as at any point in this cycle – providing the Dollar with support. Arguably the Dollar could/should have traded even stronger given the backup in US rates. The reason it has not traded stronger is probably down to the risk environment.” 

“Equity markets are holding onto early-year gains and recent buy-side investor surveys show that cash levels – though dipping – are still far from levels to suggest the buy-side is fully invested in this equity rally. Indeed, surveys still point to underweight positioning in equity markets.”  

“We suspect this delicate balance between a hawkish Fed and a buy-side still looking to add to risk assets will leave the Dollar range-bound for the rest of this quarter.”

“1.05-1.10 could be the broad range in EUR/USD and something like 128-136 for USD/JPY – the latter also having to deal with a new Bank of Japan governor.”