UBS says near-term upside in euro is "likely more limited than initially expected"

UBS revises lower their year-end EUR/USD forecast from 1.25 to 1.20

In a research note from the firm's strategists, they attribute the lower forecast revision to "surprising" weakness as risk events cloud the outlook. They argue that "the big picture cyclicals and valuation continue to favour the euro but risk events around Turkey, Italy and Brexit weighed and may continue to weigh on the single currency".

They also drill down on the individual events mentioned noting that the impact of the turmoil in Turkey is "substantial" in the short-term but macro-linkages are only "moderate". As for Italy, they see that the risks will continue to remain even though it is "likely overpriced" in the medium-term. And as for Brexit, they note that "the further UK tensions escalate, the more capped the euro upside is - at least in the months ahead".

Here are what some of the other major banks are forecasting for the EUR/USD up until Q2 2019:

Until those risks highlighted by UBS above start to abate, it's tough argue for a case for an extended upside move in the euro for the time being. Add to the fact that the dollar momentum is yet to see serious signs of exhaustion, the trade still favours the downside more than it does to the upside.