All one way for EUR/USD? - Rabobank

"It is fairly easy to put together an argument suggesting that the fundamentals surrounding the USD have worsened over the past few months," note Rabobank analysts and add: "The problem lies in the fact that the fundamentals of many of the other G10 currencies, including the EUR have also worsened."

Key quotes

"CFTC data demonstrate that going into the end of last year that the market was positioned long of USDs and short of EURs. Clearly this made the USD more vulnerable than the EUR to bad news. In the final weeks of last year there was a sharp turnaround in market expectations regarding the outlook for growth in the US economy and the likely reactions of the Fed. Market expectations of Fed tightening were dramatically pulled back and this has led to a wave of rebalancing of USD positions."

"How much further the USD will fall vs. the EUR depends heavily on how much the market wants to rebuild EUR positions. In 2019, the EUR is faced with several hurdles. In the first instance German economic data have soured. Following the release of weak German November industrial production data earlier this week, the market is debating the chances that Europe’s largest economy could have fallen into technical recession in H2 last year. Assuming the ECB does hike rates around September this year, the market is speculating that the impact would be offset by a
step up in TLTROs."

"For the EUR, the likelihood that the withdrawal of ECB policy stimulus this year is likely to be extremely cautious should temper upside potential. In addition, the prospect that the forthcoming European parliamentary elections will draw focus back to populism could weigh on the EUR into the spring. We thus see the potential for the recent recovery in EUR/USD to stall in the coming weeks and see scope for the currency pair to head back into its recent range."