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The Societe Generale Research Team offer its outlook on EUR/USD for the first quarter of 2021, slightly bearish in the near-term.

Key quotes

“Fundamental market drivers haven’t changed, but positions were crowded. 

If we can now reduce excess dollar shorts, then we’re setting the stage for a few more very messy days before underlying trends reassert themselves. 

Our Q1 EUR/USD forecast (1.20) no longer looks outdated, and we hope that level will provide a base for this move.

The key issues going on from here may be: 

1) Can the ECB successfully talk the euro down, and 

2) Does relative growth mater in FX (not just in EUR/USD).”