EUR/USD downside momentum appears exhausted – Danske Bank

The likeliness of further retracement in the pair appears somewhat diminished, according to Senior Analyst at Danske Bank Mikael Milhoj.

Key Quotes

“On Friday, the USD rally paused with EUR/USD closing at 1.062 as French election woes eased after one poll from Odoxa showed Emmanuel Macron now leading the polls for the first round with 27% to 25.5% for Le Pen”.

“At her speech on Friday, Yellen also confirmed that a March hike seems appropriate if the economy evolves as expected. A more hawkish Fed supports the case for a lower EUR/USD in the short term”.

“However, a Fed March rate hike is now priced in by 80% and given the aggressive pricing of the Fed, momentum for a lower EUR/USD could soon fade. Hence, from a risk/reward perspective, the tactical bias could soon change from selling the rallies in EUR/USD to buy on dips for a correction higher. We forecast EUR/USD at 1.04 in 1M and 1.05 in 3M”.