Forex Flash: What lies ahead of EUR/USD? – Danske Bank, UBS and Rabobank

FXstreet.com (Barcelona) - The single currency has dropped to session lows in the proximities of 1.2940 after the light calendar in the euro zone left the markets to the mercy of the risk trends. The EUR continues its depreciation against the US dollar, failing to gain traction after mixed data in the bloc.

Frank Hansen, Senior Economist at Danske Bank, believes further upside in the cross is most likely, mainly after IMM data showed that euro shorts still prevail. He also adds "If we get the long awaited pledge for help from Spain, we expect it to remove some tail-risk from the euro".

Gareth Berry, analyst at the Swiss UBS, also signal Spain as the main catalyst for any euro move, arguing "Although we expect EURUSD to drift lower into year-end, we would be reluctant to sell the euro until Spain requests a formal bailout and the ECB actually begins to buy bonds through its OMT program. Both events seem likely to occur and will probably give the euro one final push higher before the downtrend resumes".

Jane Foley, Senior Currency Strategist at Rabobank, continues to view potential risks for the EUR to fall to the 1.2600 region in the upcoming weeks. "Medium-term, however, we expect an improvement in risk appetite and coincident USD weakness to allow EURUSD to push towards 1.35 on a 12 mth view".