EUR/USD: Potential to test 1.20 in the next year – Danske Bank

FXStreet Team FXStreet

EUR/USD has shifted from the 1.18-1.20 range to testing 1.16. Economists at Danske Bank are set to trade a wider interval, 1.15-1.19, as Fed failed to provide a boost. On a three-to-six month horizon, Brexit, Fed, US election and COVID-19 can give test of 1.20.

Key quotes

“A combination of overly hawkish Fed, resurging lockdowns due to the European coronavirus situation and fading economic momentum was not what we expected a few weeks ago. As markets are coming from an already-upbeat starting point, we see the upside risks to EUR/USD as fading. In effect, markets will need to wait for a new upside story.”

“We see EUR/USD staying on the weak side versus recent history as an unexpected vacuum of policy and economic direction has come about. Looking further ahead, next year may still potential provide a new test of 1.20. Overall, do note the scope for USD appreciation due to the current global sell-off will be limited by Fed's response function.”

“In the best case for EUR/USD from here, we see several new EUR-positive factors but this will not be priced before some time. We are thus set to trade a wider interval, 1.15-1.19 and while equities remain weak, downside risk to spot is prevalent. Early next year, things may/should still change for the better.”

Author

FXStreet Team

FXStreet

EUR/USD flirts with weekly lows near 1.1770

EUR/USD now comes under further selling pressure, breaking below the 1.1800 support to challenge the area of weekly throughs near 1.1770 on Thursday. The pair’s decline comes in response to marked gains in the US Dollar amid steady geopolitical tensions. Ealier in the day, the ECB’s Lagarde delivered cautious remarks, although the currency remained apathetic.

GBP/USD threatens the 200-day SMA near 1.3440

GBP/USD rapidly leaves behind Wednesday’s strong advance, coming under heavy pressure and retesting the 1.3440 zone, where the critical 200-day SMA is located. Cable’s deep pullback follows the strong gains in the Greenback, while investors continue to pencil in a potential BoE rate cut in March.

Gold sticks to the bid bias, flirts with $5,200

Gold is now facing some downside pressure, hovering around the $5,170 region on Thursday. The precious metal adds to Wednesday’s optimism despite the Greenback trades in a firm fashion, although geopolitical tensions in the Middle East keep the yellow metal bid for now.