Credit Agricole CIB Research notes an overbought reading in EUR/USD from its short-term fair vlaue models.
"The recent appreciation of EUR/USD does not seem supported by the recent evolution of drivers like the relative central bank outlook or the credit quality of EUR-denominated assets. Indeed, more recently, we saw the UST yield curve steepening relative to the EGB curve as investors assessed the impact of future US fiscal stimulus on the long-term USTyields. Moreover, the BTP-Bund yield spread, which has been tightening aggressively since the deal on the EU recovery fund and the introduction of the ECB PEPP programme over the summer, has been re-widening more recently," CACIB notes.
"As a result of these developments, our estimated short-term fair value for EUR/USD has dropped so that the currency pair is starting to look overvalued at current levels," CACIB adds.