Danske Research discusses EUR/USD outlook and targets the pair at 1.04, 1.03, and 1.02 in 1-, 3-, and 6-months respectively.
"We view fair value for EUR/USD to be around 1.00, depending on the model employed. Either way, at current levels, valuation is a headwind for spot," Danske notes.
"There are a number of ‘second-round’ effects, which could strategically signal or entrench dollar weakness, which we are not seeing. These include 1) broad deregulation, 2) a dollar-based credit boom, 3) strong performance in Latin American assets, 4) a dollarnegative terms of trade shock (e.g. commodity prices decline on their own) and 5) a strong rise in European earning expectations versus US. A change in these factors will be key to changing our view on long-term dollar outlook but the lack thereof confirms our view that dollar weakness is likely transitory," Danske adds.