EURUSD bulls were disappointed that the ECB did not provide the catalyst to break key psychological resistance level at 1.10. French election risk is coming off the table but we remain bearish EURUSD. The market looks to be buying USDJPY on pullbacks. Assuming risk is supported and there are no surprises in the French election EURJPY hedging positions should be unwound leading to further JPY weakness.
There is a chance USD will rally across the board if the Fed try to have markets price in a higher chance of a June hike. We see the front end of the yield curve underpriced leaving room for the Fed to adopt a more hawkish stance which when adjusted will see USD rally against low yield currencies (EUR and JPY). Both EUR and JPY real yields remain low while the Fed continues their tightening cycle meaning we look for long USD against EUR and JPY.