Is Euro’s (EUR) Recent Run Higher Sustainable? OCBC FX Strategists Warn of Potential Pullback
In a recent analysis by OCBC FX strategists Frances Cheung and Christopher Wong, it appears that the Euro’s climb towards 1.12 may be reaching its peak. Despite recent gains, there are technical indicators pointing towards a possible pullback in the near future.
According to Cheung and Wong, the Euro’s recent surge can be attributed to factors such as catching up to gains in other currencies, a softer USD environment, and narrowing EU-UST yield differentials. Additionally, strong current account data for the eurozone, with a record monthly surplus of EUR51bn in June, has played a role in the currency’s strength.
Furthermore, recent comments from ECB officials have not been overly dovish, with hints that a September rate cut is not guaranteed and concerns about reaching the 2% inflation target. In contrast, Euro-area PMIs have shown little improvement, with manufacturing PMIs in Germany falling into contractionary territory and consumer confidence remaining low.
As investors look towards Jackson Hole, where central bankers gather to discuss monetary policy, there is a possibility of markets refocusing on shorting the Euro. Currently trading at 1.1166 levels, the Euro faces resistance at 1.12 and 1.1280, with support at 1.1090, 1.10, and 1.0930.
In conclusion, while the Euro has seen a strong run in recent weeks, there are indications that a pullback may be imminent. Investors should pay attention to key resistance and support levels to gauge the currency’s future direction. Stay informed and be prepared for potential market shifts in the coming days.
Analysis:
The Euro’s recent strength may be coming to an end, as technical indicators suggest a possible pullback. Factors such as currency catch-up, ECB comments, and weak economic data could contribute to a reversal in the Euro’s fortunes. Investors should monitor key levels and stay alert for potential market changes.