EUR/USD: Danske Bank is betting on the pair's rise in 2016

Danske Bank believes that the EUR/USD is currently caught between the risk of a drop associated with rate spreads on the one hand, and already highly bearish market positioning and cyclical conditions on the other hand.

"We therefore believe that the EUR/USD should evolve between 1.05 and 1.110 in the short term with a rather downward risk if the Fed decides to raise rates at the announced pace in spite of the oil price drop and concerns regarding China.

However, the decline in US borrowing rates and the fact that the markets are buying the euro in anticipation of the ECB meeting may allow the euro to rise. We maintain our forecast unchanged and continue to expect the EUR/USD to climb towards 1.16 within 12 months," says the Danske Bank.