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Economists at Standard Chartered expect the US dollar to continue moving downward in the year ahead. Nonetheless, the EUR/USD pair is set to see dips but should hold above the 1.2000 level.

See: US dollar to experience further weakness in the year ahead – MUFG

Key quotes

“We expect USD to move lower through 2021, but also expect short-term rebounds along the way.”

“We see EUR/USD long positions being, by far, the most elevated and significant for broad USD. In that context, additional drivers of a near-term decline are likely to be a recent rise in US Treasury yields, a steeper US yield curve and a widening yield differential. The large fiscal stimulus planned by the incoming Biden administration could potentially boost short-term US sentiment and economic outperformance.”

“There may also be trouble brewing in Italian politics that could lead to a snap election. With elections also due in the Netherlands (in March) and Germany (by October), the recent closer regional collaboration could soon be tested by populist politics.”

“We expect robust supports around 1.2060 and 1.2000. A mild USD rally could end there. A break lower would suggest a deeper decline into 1.1600-1.1900 window.”