EUR/USD dips remain shallow – Danske Bank

Chief Analyst at Danske Bank Christin Tuxen expects occasional dips in spot to remain shallow.

Key Quotes

“While the latest uptick in EUR/USD has not been shadowed by relative interest rates, unhedged equity and speculative flows appear to have played a key role”.

“While these flows may be fading near term and a softly priced Fed could provide USD support, we maintain that any dips in EUR/USD should be shallow and short-lived as fundamentals still provide support, and as notably a reversal in debt flows is a key source of upside risks for the cross”.

“In our view, recent price action and flow patterns have confirmed that flows are a key driver in the current ‘normalisation’ environment, which is a key reason we have upped our 12M forecast for the cross to 1.25 (1.22)”.

“Near term, we see EUR/USD trading around the 1.20 level and have upped our 3M and 6M forecasts to 1.19 (1.17) and 1.22 (1.18), respectively, as the ECB now seems less vocal on EUR strength than expected. Cross seen at 1.19 in 1M”.