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EUR/USD is vulnerable to a dip to 1.17 on a one-month view in the opinion of Jane Foley from Rabobank as the ECB has already taken a significant step in signalling to the market that it is watching the value of the euro.

Key quotes

“When ECB Chief Economist Lane stated earlier this month that ‘the euro-dollar rate does matter’, he was delving further into the realms of FX intervention than many ECB officials have dared for years. Lane appears to have succeeded in drawing a line in the sand at EUR/USD 1.20 at least for the time being. We see scope that EUR/USD could dip further towards the 1.17 level on a one-month view.”

“While liquidity levels may have undermined the USD, it is set to remain a primary safe-haven currency due to its dominance of the global payments system. This suggests that any further sharp pullback in stocks is likely to prompt more USD support.”