EUR/USD seen at 1.29 in the near term – Danske Bank

Arne Rasmussen, Head of FI Research at Danske Bank, expects the pair to climb towards the 1.20 area in the next couple of weeks.

Key Quotes

“A plethora of tier-2 releases out of the US and retail sales out of the eurozone set the macro scene for EUR/USD, which printed a 2.5-year high this morning”.

“Apart from the data, the EUR/USD momentum seems related to a reassessment of US politics and a repricing of risk premia in the eurozone. It is interesting to note that despite the ECB’s ‘threats’/hints of less bond buying across the region next year, peripheral bonds have actually performed versus the core after Mario Draghi’s Sintra speech (27 June)”.

“For Draghi, this is good news but it now comes at the price of a stronger EUR, which will bite on inflation eventually. EUR/USD is not going to stop here in our view, even though technical indicators (RSI) and the short -term fair value suggest that the pair is overbought. Yesterday’s soft comments from James Bullard are not helping the USD either. We expect EUR/USD to go to 1.20 in the next one two weeks. Strategically, EUR/USD remains a buy on dips”.