Bank of America Global Research discusses its bearish EUR/USD case over the coming months.
"We recently changed our EURUSD forecast for this year from 1.20-1.25 to 1.15-1.20 (from 1.25 to 1.15 year-end). Though our 1Q forecast of 1.20 is turning to be right, we have turned negative on EURUSD for the remaining of the year following three new developments: the mixed Fed communication and hints for QE tapering; the massive US fiscal stimulus; and a slow start of European vaccination," BofA notes.
"The market remains long EUR, which is a particularly stretched position for real money. Our baseline makes no specific assumption about the risk outlook, but our global investment strategy team is concerned about stretched valuations and positioning, which would also be negative for EURUSD," BofA adds.