EUR/USD looking to the sky – what’s next?

EUR/USD is trading at the 1.18 handle, something unseen for well over two years. What’s next?

A mix of issues for the Trump Administration and unimpressive economic figures from the US set the stage for a significant sell-off of the US dollar. In the euro-zone, nothing of huge substance has happened, but the euro has the wind behind it since the beginning of the year.

The regular EUR/USD forecast will be back next week. In the meantime, follow updates below, as well as the two opinions on what’s next:

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Here is their view, courtesy of eFXnews:

EUR/USD: Is Close Above 2015 Highs The Beginning Of Something More? – Barclays

Barclays Capital FX Strategy Research notes that that the current debate in FX market is  whether the recent EUR/USD close above 2015 highs of 1.1714 represents the beginning of something more.

“We address this subject and  conclude that valuation, relative returns and risks do not support further appreciation. Instead, conditions for a tactical reversal are increasingly apparent,” Barclays argues.

In terms of European data this week, Barclays notes that they are unlikely to change the well-appreciated dynamic of still-low inflation expecting Monday’s July HICP at 1.3% y/y in line with  consensus.

EUR/USD: ‘Elevator Up, Stairs Down’; A Big Deal On Tech Front: Key Targets – Nordea

Nordea FX Strategy Research notes that  EUR/USD recent price-action can be summarized by the phrase ‘elevator up, stairs down’.

“….And despite diverging vs rate spreads, despite stretched positioning (on IMM and similar data), despite a higher US economic surprise index, and despite a lull in equity inflows, the pair keeps rising.

We suspect real money reallocations amidst thin markets are at work, and while EUR/USD is now almost in line with its long-term (since 1973) average of 1.18, 1.25 – which is a nice round number, and 1.29 – the average since 2005 are more likely to be seen as “fair” values,” Nordea argues.

Technically, Nordea argues that the  weekly close above 1.1685 is a ‘big deal’.

“The next likely resistance is the 200wma at  1.1798, above which  1.25  beckons (38.2% retracement of the 2008-2017 drop),” Nordea project.

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