Analysts at Rabobank see risks that the USD’s sell-off is overdone and that it might be several months before there is firm evidence that EUR/USD has turned.
Key Quotes:
“For some time it has been our view that EUR/USD would turn higher into the New Year from a low in the 1.10 area this year. The fact that there is an increased risk of an insurance rate cut from the Fed brings forward the risk that the USD’s uptrend is drawing to a close. That said, we see strong risk that the market has overdone expectations of Fed rate cuts this year. Additionally, the weight of concerns about risks to global growth is likely to prevent a strong exodos from the relative safe haven of US assets back into riskier assets. These factors suggests that the recent dollar sell off could be overdone and it could be a few more months before more convincing evidence emerges that downtrend in EUR/USD has turned.”
“In reflection of our long standing view that EUR/USD will turn into 2020, we have brought forward our forecasts. Our 6 month EUR/USD forecast is now 1.12 and our 12 mth EUR/USD forecast now stands at 1.15 (from 1.12). We continue to see risk of another dip lower in EUR/USD on a 1 to 3 month view from current levels.”
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