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It looked like turnaround-Tuesday for EUR/USD as the cross dipped below 1.13, but the cross drifted higher again overnight as risk sentiment soured yet again. Economists at Danske Bank analyze the pair which is trading at 1.131.

Key quotes

“In general, the cross remains correlated with US equity markets (positive), oil prices (negative) and thus OPEC/Russia speculations, and should be very sensitive to news on US and European fiscal loosening.” 

“Markets arguably by now look quite well-stretched into a negative view, as the situation in Europe and the US continues to deteriorate, while virus and economic news out of Asia is improving.”

“Tactically, we stick to the view that upticks in EUR/USD should be faded near term, while keeping a firm eye on the risk of a US recession: in this downside risk scenario, strategically upside in the cross would likely be brewing.”


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