According to analysts from Rabobank, the EUR/USD pair has reached a critical technical pivot around the 1.11 level.
Key Quotes:
“A prime market driver this year has been speculation about the extent of Fed rate cuts. The market consensus that this would inevitable bring a weaker USD has, however, been repeatedly disappointed. It has become increasingly clear that other central banks are also sensitive to slowing world growth, not least the ECB.”
“The EUR was whipsawed by the market’s reaction to the latest ECB press conference but the remarks from President Draghi that a “significant degree” of monetary stimulus is needed leaves open the risk of a cut in the deposit rate in September further into negative territory.”
“In recent months, the hopes for further monetary stimulus have provided support for risky assets. However, persistent signs of slowing world growth suggest there is a risk of a move back into safer assets.”
“Given the risk of wobbling appetite for EM assets in coming months, we see risk of an increase in USD demand and a dip towards EUR/USD 1.10 on a 3-month view. We would then expect a moderate recovery towards the 1.15 area in 2020 on the assumption that the pace of Fed rate cuts accelerates.”
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