EUR/USD is Overvalued - BNPP
Research Team at BNP Paribas, remain positioned for further EUR/JPY and EUR/AUD upside.
“We believe USD positioning is getting increasingly short (-19 on our scale of -50 to +50) and more importantly, US front-end yields have finally adjusted to levels where risks are more skewed to the upside. US 2-year yields have fallen from 110 bps at the start of 2016 to 75 bps now. These levels are now consistent with our Rates Strategists’ year end targets.
Our STEER™ model now suggests EUR/USD is rich to key drivers with the model signals fair value at 1.1366. STEER has proven to be a reliable indicator of short-term EUR/USD movements this year.
Today, we expect a weaker reading on the ADP payroll report and the employment component of the services ISM could also point to a slowing in payroll growth ahead of Friday’s release. We forecast a slowdown to just 175K for payrolls growth on Friday.”