EUR/USD faces downside risks near term – Danske Bank

The pair should come under further selling pressure in the next weeks, suggested Mathias Mogensen, Analyst at Danske Bank.

Key Quotes

“With little in the data calendar for the rest of the week and little news from the series of ECB and Fed speeches yesterday, the market is turning the focus increasingly towards the ECB meeting next week”.

“Yesterday, we changed our call on the ECB and we now expect it to announce a QE extension by nine months at a pace of EUR30bn. In terms of the FX market, we do not expect any significant reaction in EUR/USD on the ECB’s announcement, as we have already seen a substantial repricing of the ECB in the FX market over the summer and as a ‘lower for longer’ scenario is in line with recent ECB communication”.

“Hence, we still see EUR/USD around current levels on a 1-3M horizon with the risks skewed slightly to the downside, as we expect the Fed to hike interest rates in December and as speculative accounts look stretched on EUR/USD longs according to IMM data. We target 1.17 in 1M and 1.18 in 3M”.