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EUR/USD Signal as Deutsche, and JP Morgan Change Tune on USD

The EUR/USD is rising today even as analysts turn bullish on the US dollar. The EURUSD is trading at 1.2215, which is slightly higher than this week’s low of 1.2135. 

What’s happening: Late last year, most analysts were increasingly bearish on the US dollar. Most of them were expecting the bearish trend to continue, especially if Democrats won back the Senate. 

However, this week, some analysts have started changing tune, arguing that the Democratic sweep will lead to more stimulus. This, in turn, will lead to a faster recovery, which will push the Fed to hike interest rates sooner. In a statement, analysts at Deutsche Bank said:

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“Having been vocal dollar bears last year we argue it is time for a consolidation in the dollar lower trend and would take profit on [negative dollar bets against the euro].”

In another note, those at JP Morgan, another bank that was bearish on the dollar said:

“We expect the market to reconsider the Fed’s enthusiasm for an inflation overshoot in the face of a potentially powerful post-vaccine bounce in activity [in the second half of the year].”

Further, analysts at Deutsche Bank now expect the EUR/USD pair to drop to 1.22 in the next three months and to 1.16 in the next 12 months. The latter forecast is about 5% below the current level.

EUR/USD technical outlook

What next for the EUR/USD?

On the four-hour chart, we see that the EUR/USD pair has bounced back in the past few hours. It is trading at 1.2210, which is slightly higher than yesterday’s double bottom level of 1.2135. It is also slightly below the ascending trendline. Therefore, in the near term, I believe that the price will rise to about 1.2250 and then resume the downward trend. However, if it manages to move above the ascending line, it will invalidate this trend.

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EURUSD technical chart

EUR/USD

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