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The euro has outperformed during 2020 but economists at Credit Suisse see more limited upside potential during 2021, as much as anything due to overcrowded positioning. The 1.2518/98 area is expected to cap the EUR/USD pair.

Key quotes

“We maintain our long-held bias for a higher EUR/USD following the completion of its base above the 1.1495 March high, with the “measured base objective” remaining at 1.2355, with 1.2518/98 still our core objective – the 2018 high, 38.2% retracement of the entire 2008/2017 bear market and 61.8% retracement of the 2014/2017 fall. With heavy long positioning still in place, we expect this to remain a formidable barrier, suggesting the EUR may not be the best expression of USD weakness during 2021.” 

“If our base case view for the USD is correct, this would suggest that the 1.2518/98 level too can eventually be cleared later in the year, with resistances seen next at 1.2755, ahead of 1.3191 and eventually 1.3863/1.3993 over the very long-term.”