Synopsis:
BofA has raised its EUR/USD forecasts, now expecting 1.15 by end-2025 (previously 1.10) and 1.20 by end-2026 (previously 1.15). Both fundamental and technical factors support further upside, with DXY expected to trend lower in Q2-Q3. Despite recent appreciation, EUR/USD remains well below long-term historical averages, suggesting room for a more significant rally, particularly if the structural shifts underway in Europe mirror 2017's bullish cycle.
Key Points:
1️⃣ New EUR/USD Forecasts Reflect Stronger Outlook 📊
- End-2025: Raised to 1.15 (from 1.10).
- End-2026: Raised to 1.20 (from 1.15).
2️⃣ Technicals Align with Bullish Fundamentals 📈
- DXY downtrend expected in Q2-Q3, boosting EUR/USD.
- If 2017’s pattern repeats, EUR/USD could reach 1.20.
3️⃣ EUR/USD Still Below Historical Averages 🇪🇺
- Post-2022 average: 1.08 (current levels).
- Post-Eurozone crisis/pre-Covid average: 1.13.
- Post-global financial crisis average: 1.20.
4️⃣ European Policy Reforms Supporting Structural Upside 🏗️
- EUR weakness post-Covid was driven by negative shocks and insufficient policy response.
- Ambitious reforms now in progress could bring EUR/USD back to higher, pre-shock levels.
Conclusion:
BofA remains bullish on EUR/USD, raising its 2025 and 2026 targets based on fundamental strength and technical alignment. With DXY set to weaken and EU reforms gaining momentum, EUR/USD has room to rally significantly, potentially repeating 2017’s bullish trend toward 1.20.
