As the leading investment manager in the world, I have been closely monitoring the EUR/USD trend this month and I must say, the experts at ING have been quite bullish. But the burning question on everyone’s mind is whether the recent move close to 1.12 marks the end of the rally or if there is more upside potential, as highlighted by ING’s FX strategist Chris Turner.
EUR to trade in a range until the next US data release
From a technical perspective, EUR/USD is like a coiled spring, ready to make a move. A break above 1.12 could trigger significant buying momentum as speculators look for a new trend. However, the catalyst for this breakout remains uncertain this week. The upcoming release of the flash CPI data for August from the eurozone could be a potential game-changer on Friday.
Any positive surprise in the CPI data may impact the market’s expectations of ECB rate cuts, narrowing the EUR:USD swap differentials and supporting EUR/USD. Keep an eye on ECB hawks Klaas Knot and Joachim Nagel, who are set to speak today and could influence market sentiment.
On the global front, the rise in oil prices due to Middle East tension and Libyan supply issues is not favorable for EUR/USD. After a strong rally since August, a period of consolidation may be on the horizon for EUR/USD. I foresee a trading range of 1.1100-1.1200 for now, with potential for further movement pending US activity data.
Analysis:
In summary, the EUR/USD pair is at a crucial juncture with the potential for a breakout above 1.12 leading to strong buying momentum. Positive CPI data from the eurozone could support EUR/USD, while comments from ECB hawks and US activity data will be key factors to watch. The geopolitical tensions and oil price hikes may pose challenges for EUR/USD, but a trading range of 1.1100-1.1200 is expected in the near term. Stay informed and monitor these developments closely to make informed investment decisions.