Credit Agricole Research discusses EUR/USD outlook and notes that while the single currency looks quite cheap around current levels, it migh be premature to expect a sizable rebound just yet.
The latest EUR/USD slump has pushed the pair deep into undervalued territory. Indeed, our short-term fair value model - based on rate spreads, yield curve box spreads and EGB sovereign credit spreads as well as relative terms of trade and stock market performance - points at an equilibrium value of around 1.1050 at present," CACIB notes.
"EUR/USD is increasingly looking cheap and, according to our positioning indicators, oversold. The question remains, however, whether the currency pair remains a buy. We think that it may be premature to expect a rebound in EUR/USD just yet. Indeed, abating coronavirus concerns are boosting demand for USD carry trades," CACIB adds.