After a brief dip below 1.090, EUR/USD quickly bounced back, signaling a potential bullish trend ahead. According to ING’s FX strategist Francesco Pesole, the case for a higher EUR/USD is still intact despite recent market fluctuations.
One key indicator to watch is the 2-year EUR/USD swap rate gap, which has only slightly widened to -104bp. This suggests that the Euro may still have room to appreciate against the US Dollar. Additionally, an improvement in risk sentiment could further support a rally in EUR/USD.
While there is some uncertainty leading up to the key US CPI data release, Pesole believes that even in a more defensive market environment, EUR/USD is likely to remain resilient due to favorable rate differentials.
Looking ahead, the eurozone economic calendar and ECB speaker schedule are relatively quiet, with a target of 1.10 in the near term. Pesole also predicts a potential appreciation of EUR/GBP above 0.860, despite recent corrections driven by market risks.
Overall, the outlook for EUR/USD remains positive, with potential for further gains in the near future. Investors may want to keep an eye on key economic data releases and market sentiment to capitalize on potential opportunities in the currency markets.