Euro: Downside below 1.10 before 2H27 recovery against US Dollar – OCBC
OCBC's outlook for the Euro emphasizes a notably bearish trajectory, projecting potential dips below 1.10 against the US Dollar through at least the first half of 2027. This forecast is predicated on a unique interplay of AI-driven growth in the US and persistent energy price pressures, which are expected to sustain inflation and growth differentials favoring the USD. As market participants grapple with these dynamics, the short positioning on EUR/USD appears increasingly tactical and timely.
Where it sits in our coverage
Our consensus EUR/USD target stands at 1.1500 (median across 12 firms), with Commerzbank at the upper bound (1.2200) and Investec at the lower (1.1455). OCBC's bearish stance suggests alignment with a growing minority within the market, positioning EUR/USD below current consensus expectations.
How firms align
In contrast to OCBC’s view, several firms maintain a more bullish stance on the Euro. For instance, both CIBC and Rabobank are targeting levels of 1.1866 and 1.1759 respectively for March 2026, indicating a divergence from the forecast suggesting downside risk to sub-1.10. Their outlooks can be further explored in our internal coverage at /research/cibc and /research/rabobank.
What the data shows
Recent forecast revisions have seen UBS recently predict an EUR/USD level of 1.2000 for March 2026, indicating a stronger Euro sentiment compared to OCBC's projections. Insights regarding current market positioning can be referenced in our past analysis at /research/eurusd-ecb-rate-path-2026-11-01.
How firms align with this view
Contrary positioning
Key takeaways
- 01OCBC expects EUR/USD to potentially dip below 1.10 through 1H27.
- 02Traders should consider tactical shorts on the Euro against the Dollar.
- 03AI-related uncertainty and energy prices are pivotal influences on USD strength.
- 04Current sentiment weighs heavily towards USD bullishness amid growth concerns.
Market implications
Investors should monitor the 1.10 support level closely, as a break below this mark could signal intensified bearish sentiment. Upcoming economic data and Federal Reserve decisions will provide critical signals for USD positioning, with our consensus target of 1.1500 indicating expected strength in the Euro over the medium term.
Risks to this view
A reversal of this bearish outlook for EUR/USD would hinge on a significant improvement in Eurozone economic indicators or unexpected softness in US growth, which might shift market sentiment. A notable correction in energy prices could also challenge current USD strength dynamics.
Sentiment by currency
USD+EUR JPY~GBP~Composite USD score: +0.65
Sources & References
How we cover this story
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