The EURUSD rally has taken some by surprise but some see it as the end of of the downtrend.
The team at Danske explains why and sets targets:
Here is their view, courtesy of eFXnews:
For EUR/USD, the ECB September meeting will be essential for a direction in the pair heading into the autumn. We expect Draghi to adopt a dovish tone on 3 September following the marked drop in oil prices and in inflation expectations lately. While this should not come as a major surprise we think the euro could come under pressure from verbal ECB intervention over the autumn to curb the drop in inflation expectations and thus speculation of a QE extension. Notably, the ECB will not want to see the euro strengthen – and definitely not if associated with oil heading lower still.
But, importantly, we do not expect new ECB measures to be announced and heading into 2016 the uptick in euro-zone inflation will become the dominant market theme, even with oil prices set to hover just above the USD/bb mark.
A first Fed hike in December and a re-pricing of the Fed following in Q1 next year should still lend support to USD but this will happen at a time when an ECB QE exit is moving closer.
As a result we see EUR/USD largely trendless on a 3-6M horizon with trading set to be concentrated in the 1.08-1.12 interval.
Further out, we maintain our long-standing view that EUR/USD will head higher towards levels warranted by medium- to long-term fundamentals.
We have now see EUR/USD at 1.13 in 1M, 1.10 in 3M, 1.10 in 6M, and 1.15 in 12M.
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