EUR/USD: Danske Bank says pair should fall to 1.02 within 1 month, and then sharply rally up to 1.12 within 1 year

In a note published this weekend, Danske Bank announced a lowering of its forecast for the EUR/USD pair, following the recent downward acceleration:

"We are lowering our 1-month EUR/USD forecast from 1.05 to 1.02. However, we maintain our 3-month forecast at 1.04, our 6-month forecast at 1.08, and our 12-month forecast at 1.12.

The lowering of our forecast to 1 month is due to the more hawkish than expected position adopted by the Fed last week, but we still think that the Fed will only raise its rates twice in 2017, contrary to what its latest forecasts suggest.

The break below the March 2015 low of 1.0458 has paved the way for more short-term declines, and we continue to advise selling the EUR/USD in the event of a short-term rally.

In the medium term, we expect the EUR/USD to move substantially higher due to valuation effects and the current account differential, which is in surplus in Europe and largely in deficit in the USA.