EUR/USD: 2 banks expect euro to drop to 1.10 in the short term

Danske Bank points out that the EUR/USD managed to recover somewhat on Friday, but that even a small number of NFP jobs in the US failed to push the euro above 1.1250.

"We believe that the United States is about to experience a cyclical turn in terms of the euro area, if data starts to surprise upwards. After the ECB's dovish signals, we think that the EUR/USD could slide to 1.10 in the short term.

At the same time, IMM positioning data suggests that speculators continue to prefer long positions over cyclical commodities such as oil and copper - an indication that markets are increasingly positioning themselves for a trade deal and the stabilisation of Chinese growth. This suggests that the market impact of a trade agreement may be limited."

Rabobank's analysts note that the EUR/USD fell below the 1.12 level for the first time since June 2017, as the ECB's dovish signals weighed down on the single currency.

"In the medium term, the ECB's accommodating stance should help revive the eurozone's economy. That being said, in the absence of improved economic data, we expect the euro to remain at a disadvantage and the EUR/USD to fall in the coming months.

We are keeping our EUR/USD forecast at 1.12 on a 3 month view and have lowered our 6 month forecast to 1.10."