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Analysts at Rabobank have revised their EUR/USD pair forecasts and now they see it at 1.14 on a three-month view. If there is a second wave of coronavirus, they warn EUR/USD could drop to 1.09 in a six-month horizon. 

Key Quotes: 

“The risk on move that has dominated market sentiment in recent weeks has beaten back USD strength across the board at least since the middle of May. In addition to this the recovery in EUR/USD has been fed by a couple of significant EUR centric events which may be game-changers for the EUR. At the very least they contribute towards a levelling up in the ground between the EUR and the USD. This may be insufficient to push EUR/USD back to fair value but may give the EUR a nudge in that direction. “

“We have revised our EUR/USD forecasts and now see the currency pair at 1.14 on a 3 month view. On the basis that there could be another rush into the safe haven USD if there is a second wave of Covid-19 and given scope that risk appetite could dwindle against the weight of poor economic news, we see scope for another dip lower in the 6 month horizon towards EUR/USD1.09.”

“The OECD’s estimate for purchasing power parity for EUR/USD stands at 1.40. Various other estimates of fair value put it around 1.25. We do not expect to see either of these levels in the foreseeable further but the news from the ECB and the European Commission should prop the EUR higher.”

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