Investing.com — The euro has been preventing again in opposition to the greenback, following its a post-U.S. election journey decrease, however Financial institution of America says now’s the time to to resume bearish bets on the only foreign money once more.
“For, we consider that there’s restricted upside potential to 1.06 however extra room to the draw back, because the pair might fall under 1.05 on the again of recent tariff headlines,” strategists from Financial institution of America stated in a current be aware
The relative energy index and spot/50-day easy transferring common ratios counsel that bearish EUR/USD value motion is now not stretched, they added.
The bearish outlook on the euro comes even because the Federal Reserve is anticipated to chop charges subsequent week. Nonetheless, this reduce is essentially priced into EUR/USD, the strategists stated, anticipating the up to date Fed outlook to replicate a shallow fee reduce cycle.
“[W]hile the Fed will reduce subsequent week, the Fed’s consensus (median) shall be to tilt the outlook in a extra hawkish course than in September or November,” Financial institution of America analysts famous in a current report.
An upside shock in U.S. CPI, a measure of inflation due Wednesday, might weaken the greenback, however the affect will possible be non permanent.
Whereas a damaging shock in U.S. CPI knowledge this week might initially weaken the greenback, the EUR/USD has proven “the bottom correlation to U.S. CPI surprises on this cycle,” the strategists stated.
In addition to an anticipated hawkish tilt from the Fed subsequent week on fee outlook, the EUR/USD is more likely to come added strain from the potential tariff headlines as President-elect Donald Trump formally takes the presidential reins subsequent month.
“For EURUSD, we consider that there’s restricted upside potential to 1.06 however extra room to the draw back, because the pair might fall under 1.05 on the again of recent tariff headlines,” strategists from Financial institution of America stated in a current be aware
The relative energy index and spot/50-day easy transferring common ratios counsel that bearish EUR/USD value motion is now not stretched, they added,
The bearish be aware on the euro comes even because the the Federal Reserve is anticipated to chop charges subsequent week. However the reduce is largestly priced into EUR/USD, the strategists stated, anticipating the up to date Fed outlook to replicate a shallow fee reduce cycle.
“[W]hile the Fed will reduce subsequent week, the Fed’s consensus (median) shall be to tilt the outlook in a extra hawkish course than in September or November,” Financial institution of America analysts famous in a current report.
An upside shock in U.S. CPI, a measure of inflation, due Wednesday might present weaken the greenback, however the affect will possible be non permanent.
“Whereas a damaging shock in U.S. CPI knowledge this week might initially weaken the greenback, the analysts be aware that EUR/USD has proven the bottom correlation to U.S. CPI surprises on this cycle,” the strategists stated.
In addition to a hawkish tilt from the Fed subsequent week on fee outlook, the EUR/USD is more likely to come added strain from the potential tariff headlines as President-elect Donald Trump formally takes the presidential reins subsequent month.