Credit Agricole: The dollar was the victim of unfulfilled hopes

Currency strategists at Credit Agricole recognize the risk of an upward adjustment of EUR/USD in the short term, but expressed doubts about the sustainability of such a movement and its scope.
At the bank believe that the dollar was the victim of the "buy on rumor, sell on facts" and ahead of the FOMC interest rate futures almost guaranteed increase in interest rates and accompanying statement could not warm up expectations for more aggressive tightening policy.
The liquidation of long positions by speculators disappointed in the near future will finish and market participants will remember that the dollar is the third-yield currency of the G10 as maintaining short positions in the currency is not expensive, analysts say.
The situation of the US economy remains highly constructive and Credit Agricole believe that investors underestimate the scale of the rise in interest rates in 2018 and 2019, as suggested by official forecasts of Fed. In addition, exchange rates do not reflect fully the positive for the dollar changes in the differential rate.
Credit Agricole is sticking to its forecast for EUR/USD in the second quarter at 1,04 and 1,05 in the third, hoping that the pair will recover to 1.08 in the fourth and 1.11 in the first quarter of 2018.