'SIGNIFICANTLY MORE UPSIDE': The CBA has turned bullish on the euro

Photo by Ander Gillenea/Getty Images

After being the whipping boy of currency traders and forecasters over the past couple of years, the euro is now back in vogue, mirroring the price action seen in recent months.

Oh, how the tides have turned, and relatively quickly.

Forecasters are suddenly bullish, reversing bearish calls for parity against the greenback, or lower, that were offered only weeks or months ago.

The Commonwealth Bank’s currency strategy team, among others, is the latest to make that switch, forecasting that the euro is going to continue to rally against the dollar in the period ahead, and not just by a little bit, but a lot.

“EUR/USD has significantly more upside,” says Richard Grace, chief currency strategist at the bank. “Technically, EUR/USD has broken a key level, and is on its way to 1.2000.”

Here’s the daily chart of the EUR/USD over the past year.

EUR/USD Daily Chart

Grace says that in the past a break above 1.1295 wasn’t sustained because it was not backed up by a fundamental improvement in the eurozone economy and the policy support from the ECB.

However, with the European economy strengthening and the ECB’s language becoming more optimistic, even with an attempt to hose down market exuberance by ECB “sources” overnight, Grace says that the euro now has the support and momentum from both of these factors.

“Maintain a buy on dips strategy for EUR/USD,” he advises.

The EUR/USD currently buys 1.1395.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.