The upside potential of the shared currency against the USD could be limited due to a combination of factors, think the Rabobank analysts.
Key statements
“First, the market built significant long positions in the euro in the spring and summer on the view that the EU had taken a step towards a more coordinated fiscal policy and on signs that the ECB was determined to do away with fragmentation rumors. ”
“These positions have been reduced, but given that Europe is suffering substantially from a second wave and faces a double dip in economic output in the fourth quarter, we see that the upside potential of the euro is quite limited, especially ahead of the meeting. December ECB “.
“On September 1, comments from the ECB’s chief economist made it clear that he was concerned about the rise in the value of the EUR over the summer and the rally in the EUR / USD stopped at 1.20. We continue to see this area marking strong resistance. for the EUR / USD and we would expect the currency pair to trade primarily in the 1.20 to 1.16 range in the coming months. We have revised up our 3-month EUR / USD forecast to 1.17 from 1.16 and our 6-month forecast to 1.18 from 1.14 “.
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