Danske Research maintains a bearish bias on EUR/USD strategically and tactically.
"EUR/USD edged lower below 1.07 yesterday, as markets continue to price in tighter financial conditions amid upbeat US macro data. January retail sales came out clearly above expectations, with core sales (excl. motor vehicles & gas stations) rising by 2.6% m/m. While warm weather likely contributed to the upside surprise, sales recovered broadly across all main sectors, which is consistent with the earlier positive signals from leading indicators. The strong momentum appears to have continued in February as well, as NAHB housing market index and NY Fed's Empire Manufacturing index also surprised to the upside. Notably, the prices paid index of the latter rebounded from January lows to 45.0 (above pre-covid average of 26.9)," Danske notes.
"For now, we stick to our call of Fed terminal rate at 5.00-5.25% and no cuts this year, and continue to see further downside potential for EUR/USD with 1M forecast of 1.06," Danske adds.