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Analysts at MUFG Bank, see that the recent price action in the EUR/USD pair has been similar so far to the rebound in 2017. They point out that recent comments from European Central Bank officials about the strong EUR, could help to dampen extreme bullish sentiment at least in the near-term. But they warn that if the EUR contuse to strengthen, pressure will build on ECB to loosen policy further. 

Key Quotes:

“The EUR briefly rose back above the 1.2000-level against the USD earlier this week for the first time since May 2018. It brought EUR/USD’s cumulative advance to almost 13% from the intra-day low of 1.0636 from 23rd March. The price action has been similar to between January 2017 and September 2017 when EUR/USD advanced from an intraday low of 1.0451 to a high of 1.2092. It was then followed by a temporary correction lower to an intra-day low of 1.1579 in November 2017 before EUR/USD staged one last lurch higher towards the 1.2500-level. On this occasion, we continue to see scope for a short-term correction as well.”

“We believe that verbal intervention from the ECB could help to dampen EUR strength at least in the near-term. But ultimately it will need to be backed up by further ECB policy easing as well, although that may even fail prevent further EUR gains in the year ahead.”

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