EUR/USD: a dip below 1.20 appears unlikely – Danske Bank

Christin Tuxen, Chief Analyst at Danske Bank suggested a drop to sub-1.2000 levels seems unlikely for the time being.

Key Quotes

“While at the start of the year we anticipated that the next uptick in EUR/USD would not arrive until Q2, we emphasise that the potential for relative rates, valuation and flows to support the cross alike is clearly in place”.

“Momentum is strong at present and looks increasingly reminiscent of last summer’s rally. That said, in our view the market interpretation of the minutes is not entirely ‘fair’ and we expect a softer tone at the January ECB meeting alongside the risk of a near-term Fed hike to weigh a tad on the cross”.

“But we no longer expect a sustained dip below 1.20, and have upped our forecast profile, partly reflecting the roll of an upward-sloping trend profile in the cross, and partly reflecting recent evidence of the sensitivity of the EUR to ECB rhetoric”.

“We see EUR/USD at 1.20 in 1M and in 3M (prev. 1.16), 1.23 in 6M (1.20), and 1.28 in 12M (prev. 1.25) as an ECB ‘exit’ takes us towards ‘fundamental’ levels over the next year”.