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Analysts at MUFG Bank explained that improving Eurozone data flow and diminishing downside risk has been offering little support to the euro so far. They expected broad-based weakens in the euro to continue in the near-term.  

Key Quotes:

“The EUR continues to trade heavy in the near-term. Last month’s relief rally on the back of progress towards a partial US-China trade deal and the pushing back No Deal Brexit risk has proven short-lived. EUR/USD failed to break above its 200- day moving at 1.1180 and has since fallen back below the 1.1000-level. The next target on the downside will be the early October low at 1.0879. Recent price action for the EUR has been poor as it has failed to derive much support from both an improvement in the economic data flow from the euro-zone and an easing of downside risks to the growth outlook.  

“The key question going forward is will this data improvement help stabilise the euro, or even help it turn higher? We certainly believe the change in data flow, while not yet compelling and certainly from a low base will be enough to curtail euro selling.”

“The EUR’s failure to strengthen on the back of the improving euro-zone economic data flow and easing of downside risks to the growth outlook is a bad sign for nearterm performance. It leads us to believe that downward momentum will remain in place in the near-term. A decisive break below the 1.1000-level for EUR/USD would open up the door to a potential retest of the early October low at 1.0879.”  

“The ECB’s pledge for looser policy for longer remains a heavy weight on the EUR.”