EUR/USD forecast revised – Danske Bank

“Softer Fed communication, a greater-than-expected impact on euro bond markets of the three-year LTRO as well as extreme positioning imply that downside risks to EUR/USD have decreased”, write Danske Bank analysts headed by chief analyst John M. Hydeskov.

Having said that, Danske Bank analysts expect the pair to target 1.30 in 3 months, 1.32 in 6 months and 1.36 in 12 months. The EUR/GBP and EUR/JPY have been revised as well.

However, “downside risks to the global business cycle continue to translate into downside risks” to those pairs. Being a “EUR tail-risk that will not disappear until a sustainable solution has been reached on Europe’s sovereign funding issues”, Danske Bank analysts recommend hedging EUR downside via the options (cheaper).

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