EUR/USD: risk of correction lower is high - Danske Bank
|Analysts from Danske Bank see downside risk in the EUR/USD pair in the short-term while they see it higher in the long run, targeting 1.18 in a year.
Key Quotes:
“The euro generally gained during Draghi’s press conference and EUR/USD still trades in overbought territory, in our view. Hence, we see risks skewed on the downside in the near term. In particular, we note that EUR/USD price actions contrast with European fixed income markets, where, for example, 2Y EUR swap interest rates fell back after the press conference, while EUR/USD remained higher.”
“Our short-term financial models cannot fully explain the move higher in EUR/USD (given lower interest rates). Moreover, positioning and other short-term technical measures such as the RSI also indicate that the risk of correction lower in EUR/USD is high.”
“However, we maintain the view that any dips in EUR/USD are likely to prove short-lived and, strategically, we still like to buy the cross on dips. Longer term, we still see the cross higher, targeting 1.18 in 12M.”
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