Meanwhile Credit Suisse sees 1.1804 as the top
Societe Generale Research flags a scope for EUR/USD and GBP/JPY to break lower during this month.
"The EU is sending the UK a formal infringement notice after the internal market bill went to the House of Lords. Both sides want a de minimus trade deal agreed before the UK leaves the EU at the end of the year, but the loss of trust that the UK government has triggered is a huge obstacle. The MPC is clearly split on the merits of negative interest rates (in my opinion, there are none, at all) but even so, sterling is more likely to be weaker than stronger in a month's time. GBP/JPY has had 6 days of gains but if it closes below 135 today, we fancy we'll break below 130 by month's end," SocGen notes.
"Recovery Fund concerns can hold the euro down, and the prospect of easier fiscal policy in the US doesn't suggest that we'll see any further narrowing in Bund/Treasury yields, now or for the foreseeable future. With a bullish consensus, it's disturbingly easy to name a series of reasons for the euro to be weaker.
On a positive note, even in Spain the second wave of the pandemic continues to be much less economically damaging than the first. But still, if we break outside a EUR/USD 1.16-1.19 range in October, suspect it will be to test 1.15," SocGen adds.
Separately, Credit Suisse discusses EUR/USD technical outlook and looks for the downtrend at 1.1804 to ideally cap the recent rebound.
"EURUSD has surged higher after completing a near -term base above 1.1688 and this already leaves the market approaching a cluster of what we look to be tougher resistances, stating at 1.1764 and stretching up to 1.1804 - the 55 -day average, downtrend from the early September peak and 38.2% retracement of the September fall. We look for this to ideally cap to maintain the top and for the risk to turn lower again.
Above 1.1804 would see the top negated to suggest the correction is already over and broader uptrend resumed with resistance seen next at 1.1827, then 1.1873/83, with 1.1918 needing to be cleared for a move back to the 1.2011 high," CS notes.
"Support is seen at 1.1709 initially, then 1.1693, with a break below 1.1665/61 needed to reassert a bearish tone again with support then seen next at 1.1642 ahead of the 1.1598 recent low, with 1.1495/85 still our "ideal" objective," CS adds.
