EUR/USD - stormy waters - Rabobank

"The uptrend in EUR/USD that has been in place since the start of last year is the culmination of two separate and notable movements," point out Rabobank analysts.

Key quotes

This first is broad based USD weakness and the second is an unexpected and rapid turnaround in the fundamental drivers of the EUR.  The result has been an aggressive rebalancing of portfolios away from the USD and in favour of the EUR.  It had been our view that the pace of gains in EUR/USD would slow this year on the assumption that many investors must already be long EURs.

 However, on the back of recent price action, strong Eurozone data and comments from the US Treasury Secretary we are revising up our 12 mth EUR/USD forecasts to 1.28 from a previous forecast of 1.24.  The conservative nature of this revision reflects our expectation that EUR/USD is vulnerable to a period of consolidation or a pull-back in the coming weeks.