EUR/USD: near-term outlook from banks

EUR/USD: near-term outlook from banks

Diperbarui • 2019-11-11

Looking back into the recent past

The euro edged down to 1.0567 in the course the past week. There were several substantial headwinds for the single currency:

Investors continue to weigh political risk from the upcoming French presidential elections;

ECB President Mario Draghi in his last week noted that inflation in the euro area is not strong enough for a shift to tighter monetary policy. It boils down to a preference of the ECB policymakers to sticking with their current policy stance (running QE until the very end of the year, keeping rates on hold until significant pick-ups in interest rates).

Peeping into the future

The Bank of Tokyo-Mitsubishi analysts believe that the EUR/USD downfall will be limited, because:

The opinion polls in France show anti-EU Marin le Pen has no chances to beat Emmanuelle Macron in the second round of presidential elections (the first round is to be held on April 23, the second one – May 7).

Source: opinionlab

Central bank’s data on portfolio flow in the euro-zone can become a real boost for the euro due to shift in long-term portfolio investments.  

Nomura’s strategists are less confident in Macron’s win. They are preparing themselves for unexpected outcomes. In case of Macron’s victory, they expect EUR to rally with 1.15 target by year-end. In reverse scenario, Nomura would bet on EUR/USD testing 0.97 level (long-term forecasts).

Technically, we might expect a further EUR weakness towards 1.0555 (61.8% Fibo level traced from last-year low), or lower to 1.0490 level last seen in February. Overall, only a move above 1.0625 (50% Fibo retracement level), or 1.0600 would indicate that the downward pressure has eased and that we may target higher levels at 1.0660 (50-day MA), 1.0665.  

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