EUR/USD: Caught In 1.05-1.10 Range; What's Next? - Danske

At the end of this week, EUR/USD moved higher, defying the sell-off in equities and oil prices.

The former suggests that the single currency is increasingly regarded as a safehaven currency while the latter underlines that the historically close co-movement of the oil price and EUR/USD is challenged. One reason for this is that the weaker oil prices now benefit the euro area relatively more than the US. Thus, an oil price that is set to stay 'lower for longer' boosts the potential for EUR/USD to move higher further out.

Currently, EUR/USD is in our view caught in the 1.05-1.10 range, but later on we expect a rebound on no renewed policy divergence and strong EUR fundamentals.