Jane Foley, Head of FX Strategy at Rabobank, believes the pair could grind lower towards the 1.2100 area within a year’s view.
“In March, we revised lower our 12 mth forecast for EUR/USD to 1.21. Due largely to the distorting impact of politics, interest rate differentials provided little draw for EUR/USD last year”.
“On a long-term perspective, however, rate spreads do tend to provide broad direction for currency pairs. Therefore we do favour moderate downside potential for EUR/USD”.
“The EUR could find some support from a worsening in the trade tensions between China and the US. However, the sharp increase in long EUR positions in 2017 suggests that significant gains could be difficult to achieve, particularly given recent disappointments in Eurozone economic data”.