Analysts at MUFG Financial institution, proceed with a bearish bias for the EUR/USD pair. They anticipated it to commerce within the 1.1500-1.2000 vary over the subsequent weeks. They level out the near-term outlook for the US dollar has turned extra constructive with risk aversion extra evident within the monetary markets as investor fears over the unfold of the Delta variant undermines the constructive development outlook.
“We’re sustaining a bearish bias for EUR/USD within the month forward. The pair has not too long ago fallen again in the direction of the 12 months to this point low at 1.1704 from the top of March. The subsequent key assist degree is offered by the lows from late final 12 months at 1.1603, and would then open the door for a break again under the 1.1500-level. Downward stress on EUR/USD has been pushed by two key developments: i) the opposed market response to the Fed’s hawkish coverage shift in June, and ii) protected haven demand for the US greenback has picked up not too long ago as market members have grow to be extra involved over the worldwide development outlook.”
“Market members might be intently looking forward to additional indicators of slowing international development momentum over the summer season interval. The subsequent FOMC assembly might be scrutinized intently to see if the Fed has made additional progress in the direction of slowing the tempo of QE. It’s the ultimate FOMC assembly earlier than Fed Chair Powell’s a lot anticipated annual speech at Jackson Gap on the finish of August. Constructing fears over the worldwide outlook and falling market-based measures of inflation expectations may encourage the Fed to be extra cautious by ready till later this 12 months earlier than tapering. A extra cautious method would at the very least assist to dampen US greenback power within the near-term.”
“The current sharp pick-up in COVID instances in Europe, particularly within the Netherlands and Spain, has elevated draw back dangers to forecasts for strong development within the euro-zone and undermined near-term sentiment in the direction of the euro.”
“Markets members might be on the lookout for the ECB to regulate plans for his or her QE packages (PEPP & APP) as effectively to supply reassurance that looser coverage might be maintained. It ought to hold downward stress on EUR/USD because the Fed strikes nearer to tapering QE.”