FX Daily: No trigger in sight for a dollar reversal
Per the full note , ING argues the dollar's overbought condition is not sufficient to call an imminent reversal, and has lowered its EUR forecasts to embed a more durable fiscal risk premium while flagging that rising BoE hike prospects should keep EUR/GBP pressurized. The supporting evidence is dense: ING's short-term valuation model shows the dollar overvalued against every G10 currency except GBP, where it sits at fair value, with EUR, SEK and NZD undershooting fair value by 1.5–2.5% and beyond the 1.5 standard deviation threshold. Positioning corroborates — net long USD versus G10 reached 24% of open interest as of last Tuesday, excluding JPY where longs remain unusually elevated — and 3-month DXY-weighted risk reversals are near the peaks seen in March 2025 and March 2026. The desk's key point is that no macro or market catalyst is in sight to force the turn; the March 2025 unwind required a Sell-America shock, and nothing comparable is currently on the table. This sits awkwardly against our internally tracked consensus, where the median EUR/USD forecast is 1.1700 for Mar-26 and 1.1600 for Dec-26 — well above spot at 1.1253 — implying the street is already positioned for the turn ING says isn't coming. No high-impact events are on the calendar for the next 30 days, so there is no scheduled catalyst to force the resolution either way.
What the desk is arguing
Per the full note , ING's central claim is that an overbought dollar is not the same as a reversing dollar, and that no trigger exists to force a turn right now. The desk frames this as a patience argument rather than a structural bullish-dollar call — it is not adding to dollar longs, but it is explicitly declining to fade the move. The note lands alongside ING's October FX Talking, titled "Au revoir, euro bulls," which signals a deliberate downgrade to EUR forecasts to reflect a more durable fiscal risk premium.
The evidence stack is unusually rich. ING's short-term valuation model shows the dollar overvalued against every G10 currency except GBP (fair value), with EUR, SEK and NZD particularly cheap by 1.5–2.5% and sitting beyond the 1.5 standard deviation threshold. Positioning reinforces the stretch: net long USD versus G10 hit 24% of open interest as of last Tuesday, excluding JPY where long positions remain unusually elevated. Options markets agree — 3-month DXY-weighted risk reversals are near the peaks last seen in March 2025 and March 2026. The desk also notes firmer oil prices, following increased military activity in the Gulf, have contributed to the dollar's solid footing.
The counterfactual ING explicitly rejects is that overbought + overpositioned = imminent reversal. The historical template the desk invokes is March 2025, when it took a Sell-America shock to derail an overbought dollar — a catalyst-class event that is not visible in the current macro or market configuration. Absent that, the desk treats stretched technicals as a condition to monitor rather than a signal to trade against.
Where it sits in our coverage
The cross-firm consensus for EUR/USD sits at 1.1700 for Mar-26 (range 1.1200–1.2000) and 1.1600 for Dec-26, against a current spot of 1.1253. Among the tracked forecasts:
- rabobank: Mar-26 1.1759, Dec-26 1.1800
- socgen: Mar-26 1.1700, Dec-26 1.1400
- rbc: Mar-26 1.1600, Dec-26 1.2000
- nomura: Mar-26 1.1700, Dec-26 1.2000
- cibc: Mar-26 1.1866, Dec-26 1.2200
- lloyds: Mar-26 1.1331, Dec-26 1.1200
ing's own recently revised EUR view sits at Mar-26 1.1700 and Dec-26 1.1700, putting the desk at the consensus median for the near tenor but only mid-range for Dec-26. That is notable: ING has lowered its EUR forecasts yet still sits above the Dec-26 median of 1.1600, implying the desk's downgrade is a trimming exercise, not a capitulation. mizuho revised to Mar-26 1.1500 / Dec-26 1.1500 on 2026-10-06, and uob cut its Dec-26 view from 1.1800 to 1.1400 on 2026-10-09 — both more bearish EUR than ING's revised call. cibc sits at the top of the range with a Dec-26 target of 1.2200, a full 6 cents above ING's revised number and over 8 cents above spot.
How other firms see it
The aligned camp on the dollar-strength-for-longer thesis includes lloyds (Dec-26 1.1200), hsbc (Dec-26 1.1000), mizuho (Dec-26 1.1500) and uob (Dec-26 1.1400) — all sit below the 1.1600 consensus median and collectively validate ING's argument that EUR upside is capped near-term. The contrary camp is led by cibc (Dec-26 1.2200), rbc (Dec-26 1.2000) and nomura (Dec-26 1.2000), all of whom are effectively betting on the dollar reversal ING says lacks a trigger. The spread between the lowest Dec-26 target (hsbc at 1.1000) and the highest (cibc at 1.2200) is 12 big figures — an unusually wide dispersion that itself signals the market has no consensus on the dollar's medium-term path, only on its near-term resilience.
The EUR/USD trajectory here intersects directly with the ECB rate path — any dovish shift in ECB communication would validate the fiscal-risk-premium thesis ING is embedding. Worth watching is EUR/GBP, where ING explicitly flags that increasing prospects of a BoE hike should keep the cross under pressure for longer, and USD/JPY, where the desk notes long positions remain unusually elevated and therefore pose a distinct unwind risk separate from the broader G10 positioning story.
What the calendar says
No high-impact events are scheduled in this jurisdiction over the next 30 days, which is itself the operative fact. ING's entire thesis rests on the absence of a catalyst — and the calendar block confirms that no scheduled data release or central-bank decision is positioned to provide one. That means the burden of proof falls on unscheduled events: a geopolitical escalation, a fiscal headline, or an unexpected policy leak. Traders holding EUR/USD longs against the consensus 1.1700 Mar-26 target are effectively waiting on a catalyst that the calendar says isn't coming on any known timetable.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01ING's core call: overbought dollar ≠ reversing dollar; no macro catalyst in sight to force a turn, so fade the move at your peril.
- 02Valuation and positioning evidence is stacked: USD overvalued vs every G10 currency except GBP, net long USD at 24% of open interest ex-JPY, 3m risk reversals near March 2025 and March 2026 peaks.
- 03ING has lowered EUR forecasts to reflect a more durable fiscal risk premium, while BoE hike prospects keep EUR/GBP under pressure — the revised Dec-26 EUR call sits at 1.1700, still above the 1.1600 consensus median.
- 04Cross-firm dispersion on Dec-26 EUR/USD is unusually wide — hsbc at 1.1000 versus cibc at 1.2200 — a 12-figure spread signalling no street consensus on the medium-term dollar path.
- 05No high-impact events on the calendar for 30 days: the absence of a scheduled catalyst is itself the thesis.
Market implications
Watch EUR/USD for a break below the 1.1200 handle that would align spot with the bottom of the Mar-26 consensus range and vindicate the lloyds / hsbc / mizuho / uob camp. EUR/GBP is the cross to monitor for the BoE hike narrative ING flags — any hawkish BoE communication would extend the pressure the desk expects. The positioning signal to track is net long USD versus G10 at 24% of open interest: a move above 28–30% would historically precede a sharper corrective episode, even without a macro trigger.
Risks to this view
The call is invalidated by a catalyst-class event of the March 2025 variety — a US fiscal credibility shock, an abrupt Fed pivot, or a geopolitical escalation that forces a broad dollar unwind. A softer-than-expected US data run, particularly in the NFIB survey or home sales figures ING flags as today's calendar highlights, could begin the reversal the desk says lacks a trigger. Finally, an unwind of the unusually elevated USD/JPY long positioning could spill over into broader dollar weakness faster than the no-trigger framework anticipates.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Barclays | Bullish | 1.2100 |
Goldman Sachs | Bearish | 1.1200 |
UOB | Bearish | 1.1140 |
Articles FX Daily: No trigger in sight for a dollar reversal Published 07:45 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download A range of indicators suggests the dollar rally is becoming stretched. But with no clear macro or market catalyst in sight, we see little reason to call for an imminent reversal. We have lowered our EUR forecasts to reflect a more durable fiscal risk premium, while increasing prospects of a BoE hike should keep EUR/GBP under pressure for longer Francesco Pesole , Frantisek Taborsky and Chris Turner Dollar strength continues to climb, supported by firmer oil prices We have published the October edition of FX Talking: Au revoir, euro bulls , with updated FX forecasts and views.
USD: Overbought signals not that relevant for now The start of the week has brought more dollar strength. Firmer oil prices, following increased military activity in the Gulf, have helped keep the dollar on solid footing. Today’s calendar is unlikely to be particularly impactful, with the NFIB survey and home sales figures the main highlights.
That said, several technical indicators point to an increasingly stretched USD rally. Our short-term valuation model shows the dollar overvalued against every G10 currency except GBP, where it’s at fair value. On an equally weighted basis, USD is 1.1% overvalued versus G10.
EUR, SEK and NZD stand out as particularly cheap, undershooting fair value by 1.5-2.5% and sitting beyond the 1.5 standard deviation threshold. Positioning tells a similar story. Excluding JPY, where long positions remain unusually elevated, net long USD positioning versus G10 reached 24% of open interest as of last Tuesday.
Options markets are sending the same signal, with 3m DXY-weighted risk reversals near the peaks seen in March 2025 and March 2026. Is this enough to call for a reversal in dollar momentum? We do not think so.
In March 2025, it took a Sell-America shock to derail an overbought USD. In March 2026, expectations of a static Fed prevented the dollar from benefiting from geopolitical tensions. A clear macro or market catalyst is needed for a reversal, and we do not see one.
Fed tightening expectations remain stickier than those for most other central banks, limiting USD downside even if oil prices retreat. At the same time, weakness across global bond markets continues to support demand for a liquid defensive currency. Consensus is already looking for a modest 0.2% core CPI MoM print tomorrow, limiting the scope for a negative USD reaction.
Further ahead, US midterms may represent a somewhat underappreciated USD risk. However, markets have long priced in the possibility of Republicans losing control of Congress, and any precautionary, potentially USD-negative positioning ahead of the vote may not emerge until late October anyway. Francesco Pesole EUR: 1.13 is our new year-end target EUR/USD is around 1.5% undervalued relative to short-term fundamentals.
Sources & References
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