EUR/USD seen at 1.04 in the short –term – Danske Bank

Analyst at Danske Bank Ayla Mihr assessed the recent OPEC deal and expects the pair to grind lower to the 1.04 area within the next three months.

Key Quotes

“Yesterday, OPEC agreed to a deal, which will see its total output fall to 32.5mb/d from 1 January 2017. However, the deal is contingent on non-OPEC producers agreeing to contribute with 600kb/d of output cuts at a meeting on 9 December”

“The announcement led oil prices to rally with the price on Brent crude rising above USD50/bbl – an increase on the day of about 8%. This led to a rally in oil currencies with EUR/NOK falling to around 9-9.02 and USD/RUB falling close to 64”.

“We could see oil prices erasing part of the gain today if the market starts to doubt the credibility and longevity of the deal”.

"“Such a move would weigh on NOK and RUB correspondingly. We forecast EUR/NOK at 9.20 on 1M and 3M. A further rise in ISM manufacturing, which we are looking for today, may add further fuel to the ongoing repricing of Federal Reserve rate hikes and fuel to the rally in USD, which has been taking a breather over the past week. We forecast EUR/USD at 1.05 in 1M and 1.04 in 3M”.