The dollar is heading towards a gradual depreciation which will be more evident in the second half of the year, after the elections in France, Germany and -perhaps- in Italy. This is the conclusion reached by MPS Capital Services in its Market Strategy Update today, Thursday.
According to the Sienese group's think-tank, “the Trump administration's statements together with those of Yellen, as well as the aforementioned reversal of portfolio flows, argue in favor of creating a support area near 1,04. In other words, any temporary phases of recovery in the depreciation of the dollar could be confined to this area;
2) looking ahead, we reiterate the hypothesis of a further depreciation of the greenback, especially in the second half of 2017, towards the 1,15 area.
3) especially in the second quarter, the main risk remains the electoral outcome in Holland and France (Italy?) The main level of resistance in the short term is around 1,08/1,10;
The premise from which Mps Capital Services starts is that two signals converge in this direction: on the one hand, the declarations of the new US president and the Fed president converge in judging a too strong dollar harmful; on the other hand, portfolio flows, meanwhile, have reversed for the first time in 4 years in recent months, leading to net sales of foreign bonds by European investors. A trend that is understandable in light of the fact that, in the meantime, a significant rise in interest rates has also materialized in the Eurozone.
