According to analysts from Rabobank, see the EUR/USD pair moving to the downside on the back of US dollar strength.
Key Quotes:
“In the space of just one month, EUR/USD has traded as high at 1.1757 (on September 27) and as low at 1.1432 (October 9). This volatility has sent misleading signals about whether EUR/USD is ready to bounce higher from the downtrend that has dominated a large part of this year or whether what we have witnessed in recent weeks is a series of short-term corrections within a long term downtrend.”
“We remain of the view that USD strength has further to run and continue to forecast that EUR/USD will bottom in the 1.12 area in the middle of next year. By H2 2019, EUR/USD is likely to be traded against the backdrop of a fresh set of concerns which could include slower US growth in addition to an uneasy political backdrop in the Eurozone.”
“We are of the view that by the second half of next year the market will be looking at a less attractive backdrop for the USD. By then slowing US growth, plateauing Fed interest rates and potentially a greater focus on the budget deficit could be clouding the outlook for the USD. Our central view is that EUR/USD could see a bottom around the middle of next year. That said, EUR/USD could struggle to push higher dependent on the political and economic backdrop in the Eurozone.”
“With the populist mood in Europe possibly set to make a mark on the outcome of the European parliamentary elections next spring, the themes of prudence and reform could take less prominence in the Eurozone going forward. This would impact the direction of the EUR and suggest the room for a recovery in the EUR in H2 2019 could be limited.”
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