Societe Generale Research flags a scope for some messy days for EUR/USD trading over the near-term.
"Fundamental market drivers haven’t changed, but positions were crowded. If we can now reduce excess dollar shorts, then we’re setting the stage for a few more very messy days before underlying trends reassert themselves. Our Q1 EUR/USD forecast (1.20) no longer looks outdated, and we hope that level will provide a base for this move," SocGen notes.
"The key issues going on from here may be 1) can the ECB successfully talk the euro down, and 2) does relative growth mater in FX (not just in EUR/USD)," SocGen adds.