EUR/USD could re-test 1.05 in the next months – Danske Bank

Pernille Henneberg, Senior Analyst at Danske Bank, believes spot could deflate to the 1.0500 area in the next months.

Key Quotes

“In the majors, EUR/USD moved further down yesterday on the Reuters story with unconfirmed ECB sources apparently downplaying the ECB’s desire to start tightening”.

“While the idea of ‘hiking the deposit rate before ending QE’ is a key wildcard for possible upside in EUR/USD, we stress that the cross is vulnerable short term due to light positioning and our call for relative rates to move in favour of USD”.

“We are 'not too worried' about the possible impact of the French election and Brexit discussions given the resilience the cross has shown over the past year, which we would ascribe to the fundamental undervaluation in the cross”.

“We see potential for the pair to head back towards 1.05 in coming months”.