EUR/USD could still dip back to the recent low of 1.0350 – Rabobank

The EUR/USD is about to end the week hovering around 1.0550, with a modest gain. Analysts at Rabobank continue to see the risk of a dip back to the year’s low at the 1.0350 region on a one to three-month view. They revised lower their 12-month forecast to 1.08 from 1.10.

Key Quotes: 

“The move lower in US treasury yields this week suggests that the market focus is in the process of shifting to growth risks and away from inflation.  This could take some time to play out and the tug of war between the two drivers could characterise market developments in the months ahead.”

“Insofar as a recession in the world’s largest economy is hardly an endorsement of risk appetite, we expect the USD to hold up relatively well into next year.  In consideration of the USD’s safe haven characteristics, in addition to the considerable energy related risks that are faced by the Eurozone this winter, we have revised lower our 12 month forecast for EUR/USD in spite of the rise in rhetoric regarding US recessionary fears.”