The EUR has been supported of late, mainly on the back of stabilizing business activity as confirmed by the latest PMI releases.
Elsewhere, ECB Governing Council member Weidmann indicated that more time is needed in order to evaluate the latest policy measures’ impact on the economy and that actual deflation risk is regarded to be low.
All of the above suggests further stabilizing investors’ ECB monetary policy expectations.
This combined with further improving risk sentiment may make a case of additional EUR upside in the weeks to come. It must be note that rising growth expectations as driven by rising business activity may support demand for EUR-denominated risk assets to the benefit of the currency.
Under such conditions the currency is likely to become more sensitive to risk appetite anew.
As a result to the above outlined conditions we remain long EUR/USD as a tactical trade.
*CA holds long EUR/USD from 1.2660 with a target at 1.31 and a stop of 1.2350.
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