EUR/USD breached the 1.12 level on Wednesday. In the view of economists at Rabobank, the momentum behind the recent move in the USD does raise the possibility of pullbacks.

Technically, EUR/USD could recover back towards the 1.15 area

“Medium-term, we continue to favour the USD. However, with the market now long USD and short EUR and the money market very aggressively positioned for Fed rate hikes next year, there is scope for pullbacks in the currency pair.”

“Technically EUR/USD could recover back towards the 1.15 area and still remain in the downtrend that has been in play since early June. Potential triggers could be the next round of US data including the December 3 payrolls release. The guidance and tone of the December 15 FOMC meeting is also in view.”

“While there is growing risk that EUR/USD will reach the 1.10 area next year, the risk of pullbacks means that we are holding off from changing our 1.12 target for the time being.”