EUR/USD: Morgan Stanley's forecast for this week (19 September)

Like it often does, this Monday Morgan Stanley gave its weekly forecasts for the euro and the dollar for the week starting 19 September 2016:

EUR: Bullish opinion

"We remain bullish on the EUR and are buying EUR/USD. EU financial institutions have weak balance sheets and profitability decreased because of the lower rates. This pushes them to reduce their holdings in foreign assets, thus reducing capital outflows without compensating with commercial demand, thus supporting the euro on the forex. We recommend buying the EUR against the USD, GBP and JPY."

USD: Neutral opinion

"We believe a dovish Fed and a positive environment in the coming months will help lower the USD. Growth in Q3 rebounded but the US data was worse than expected, including retail sales last week. We also believe that even if the Fed backs the rate - which is not the expected case - it will be a dovish rate hike followed by a long pause period".

Morgan Stanley now holds a long EUR/USD position initiated at 1.1200 and a long EUR/JPY position initiated at 115.39.