Danske Research discusses EUR/USD outlook from the valuation front.
"We view fair value for EUR/USD to be a 1.08-1.20 range, depending on the model employed. Either way, at current levels, valuation is neutral if not an outright headwind for spot," Danske notes.
"US assets’ trend performance continues to be strong relative to European counterparts and the COVID19 pandemic has fast-forwarded the adoption of technology, favouring flows into the US. EUR/USD thus faces structural decline due to a lack of competitiveness. In our view, a valuation reversal (lower EUR/USD) could come from rising US real rates, fading EU optimism and/or falling equities," Danske adds.