The time has come – Rabobank

For most of this year, EUR/USD has been bounded by a range of 1.10 to 1.06, notes Jane Foley, Senior FX Strategist at Rabobank.

EUR/USD will trade at 1.12 on a 3-month scale

“This month’s bigger break and the emergence of a new policy cycle for the Fed suggests that a new range is being drawn. The upcoming release of August US labor force data and the next round of US CPI inflation figures suggest that the scope for volatility in the US dollar (USD) is intersecting in the near term as the market adjusts its expectations of the size the Fed’s September policy decision.

“We see scope for pullbacks to EUR/USD 1.10 if key US data from early September prints on the firm side of market expectations. That said, based on Rabo’s revised view that four consecutive Fed rate cuts could be on the books, we have revised our 3- and 6-month EUR/USD forecasts to 1.12 and 1.11 respectively from 1.09.”

We have left our EUR/USD 9-12 month forecast at 1.10, assuming that US inflation fears could get a new boost next year following the outcome of the US election.