EUR/USD: Likelihood of breaking 1.20 medium to long term remains high – CitiBank

The outcome of the September FOMC meeting was mostly as expected forecasts were substantially upgraded, and median “dots” continue to imply policy rates remaining at 0-25bp through 2023, which favor the euro, according to analysts at CitiBank. They forecast EUR/USD at 1.17 over a three-month horizon at 1.22 in 6 to 12 months. 

Key Quotes:

“More medium term, relative real rate differentials continue to make new local highs (almost back to zero in EUR less USD), reducing the relative attractiveness of owning US dollars for investors. We still believe that the medium – long term likelihood of EUR/USD breaking 1.20 remains high, particular as US real rates are unlikely to move materially higher given the Fed’s fresh mandate. Besides, hard data showed that the economic recovery continues.”

“EURUSD has been above the 55-day moving average for about 3 ½ months. The 55-day MA stands at 1.1703 with good horizontal support at 1.1696-1.1711. If, it were to fall again and close below the 55-day MA then the 200-day MA is a long way away at 1.1218, with resistance at 1.1495.”