EUR/USD exposed to two clear downside risks in near-term – Societe Generale

The analysts at Societe Generale offer their outlook on the EUR/USD pair, in the wake of the recent weakness in the pound and the Chinese Yuan.

Key Quotes:

“Over 6-12 month horizon, given positions and valuation, it's easier to see EUR/USD at 1.20 than 1.05.

But, in the one to the three-month horizon: There are two clear downside risks.

A weaker Yuan … A near-term break of USD/CNY 7 may be unlikely, but it would drag EUR/USD through the year's lows and could trigger stops.

And a weaker pound … If sterling takes another significant knock that too will hurt the Euro.

 It’s difficult to gauge the probability of the Chinese authorities allowing USD/CNY to break higher, or of another sterling confidence crisis.”