EUR/USD: Decisive break above 1.1200 is required for a more sustainable move higher – MUFG

Analysts at MUFG Bank point out the Eurozone economy is beginning to stabilize and they seen the EUR/USD pair moving in the 1.0900-1.1250 range over the next weeks. 

Key Quotes:

“The euro has entered into a consolidation phase against the US dollar in the nearterm. After hitting an intra-day low of 1.0879 on the 1st October, the EUR/USD rate has since risen modestly but was unable to break above its 200-day moving average at just below the 1.1200-level. It leaves the pair currently trading in a narrow range between 1.1000 and 1.1200. Downside risks for the euro have diminished recently.

“The risk of a No Deal Brexit has been pushed into 2020. US-China trade negotiations are moving in a more positive direction, and President Trump has decided against imposing higher tariffs on imports of autos which could have delivered another meaningful blow to the industrial sector in Europe. According to reports, President Trump has delayed his decision for another six months.”

“At the same time, the euro is deriving more support from the improving euro-zone data flow. There have been tentative signs that the euro-zone economy could be close to passing the worst point of the slowdown. Leading indicators such as the Sentix and ZEW surveys rebounded markedly in October, and hard data including the German trade and factory orders reports beat expectations in September. However, the ECB has already set out its stall for aggressive easing which acts to dampen upside potential and encourages the use of the euro as a funding currency. A decisive break above the 1.1200-level would be required to set the stage for a more sustainable move higher.”