Danske Research discusses EUR/USD outlook and now sees the pair trading in a wider 1.15-1.19 range going into year-end.
"Since last week, EUR/USD has shifted from the 1.18-1.20 range to testing 1.16. We suspect the factors, which have combined to create this situation, will continue to weigh until yearend. We thus see EUR/USD staying on the weak side versus recent history as an unexpected vacuum of policy and economic direction has come about. Looking further ahead, next year may still potential provide a new test of 1.20. Overall, do note the scope for USD appreciation due to the current global sell-off will be limited by Fed’s response function," Danske notes.
"We thus see more short-term weakness in EUR/USD than previously anticipated as fundamentals have changed. In the best case for EUR/USD from here, we see several new EUR-positive factors but this will not be priced before some time. We are thus set to trade a wider interval, 1.15-1.19 and while equities remain weak, downside risk to spot is prevalent. Early next year, things may/should still change for the better," Danske adds.