Rabobank: EUR/USD - shift?

Since the middle of May (see here) we have been discussing the potential for directional differentiation between the structural and cyclical drivers of the USD.

In summary, even if the USD has entered into a period of long-term decline, many market participants would likely accept that there was space for cyclical uptrends.

This month the DXY dollar index has traded at its highest levels since last spring, which begs the question as to whether the greenback has entered into a cyclical upswing.

That said, EUR/USD has a significant weighting within the DXY index.

In our view, changing levels of enthusiasm for the EUR since early last year have played an often-underestimated part in the movements of EUR/USD in the period since.

We will be revisiting our EUR/USD forecasts this week with a view to forecasting a more emboldened dollar.

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