EUR/USD risks becoming more two-way – MUFG

Matías Salord FXStreet

The EUR/USD is about to post end higher for the second weekly in a row, “notable gains” according to analysts at MUFG Bank. They point out that the bounce in the pair is very notable and is becoming more difficult to simply dismiss out of hand as just a temporary reversal.

Key Quotes:

“EUR/USD is heading for a second week of gains for the first time since April 2021. The percentage increase over the two-week period is close to 3%, which if we exclude the very volatile period during the period of covid, would be the largest two-week gain since February 2016 when the US dollar reversed course on the back of Fed communications suggesting a slower pace of monetary tightening in response to the financial crisis in China at that time.”

“Our current FX forecasts shows a low-point of 1.0400 in Q2 before a gradual increase through the second half of the year. The price action of late reinforces our view that the scope for notable further US dollar strength from here is becoming more limited.”

“There are risks that this current bounce in EUR/USD could fade and we could correct lower as financial conditions tighten again, risk aversion becomes more pronounced and there is a renewed flight to the dollar. We are mindful though that if those conditions do not materialise relatively soon, EUR/USD could rally further.”

“There are reasons for us to believe that US dollar strength could emerge again. While EUR/USD could drift lower again there are factors to suggest better support for EUR/USD is emerging. We remain sceptical of parity being hit.”

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

EUR/USD remains bid, focus stays on 1.1900

EUR/USD has broken its two-day run of losses and is ticking modestly higher on Thursday, hovering around the 1.1880 area as the US Dollar struggles to find clear direction. Weekly Initial Jobless Claims rose more than expected, taking a bit of shine off the Greenback, but markets are largely in wait-and-see mode ahead of Friday’s US CPI release.

GBP/USD sticks to the bid bias, still below 1.3700

GBP/USD is trading with decent gains around 1.3650 on Thursday. Indeed, Cable is attempting to shake off the weakness seen earlier in the week amid another choppy session for the Greenback, while a run of disappointing UK data has so far failed to derail the pair’s tentative recovery.

Gold recedes slightly, trades below $5,100

Gold remains stuck in choppy trade on Thursday, deflating marginally just below the $5,100 mark per troy ounce as the US Dollar drifts without a clear trend. Softer US Treasury yields across the curve are offering some support, but with markets treading carefully ahead of Friday’s US CPI release, conviction remains limited and price action continues to look hesitant.