Societe Generale Research flags a scope for a further near-term correction in EUR/USD but maintains a structural bullish bias targeting a move towards 1.30 over the medium to long term.

"The chart's a bit retro, showing short rate differentials and EUR/USD. In the old days, the current rate spread would have been consistent with EUR/USD around 1.30. Today, all we can say is that relative rates are no longer moving in the euro's favour, and EUR/USD has risen a lot on the back of a build-up of positions which needs to be reduced," SocGen notes. 

 

"We could draw a lot of pictures and they'd all pain the same story - a move in EUR/USD 1.20 accompanied by lighter positions and the passage of time, as we saw with the correction over the summer/autumn, would be healthy. A move to 1.15 would be excessive. A move to 1.30 is possible, even likely, eventually; but it's not going to happen,' SocGen adds.