According to analysts at CitiBank, the rising tensions between China and the US and investors' attention to the upcoming US presidential election may increase further downward pressure on USD and support the EUR. They expected a near term pause in EUR/USD, but they look the bullish trend to continue medium term.
Key Quotes:
“Whilst we expect a near term pause, from our cross asset lens we note that relative short end rate differentials, relative performance of periphery spreads vs. bunds and higher commodity prices/ higher HICP inflation are likely to keep EUR outperformance intact. Technically, the EUR has now broken out of medium term downtrend and looks set to eventually test 1.20+”.
“EURUSD price action here is increasingly looking similar to that seen before the correction lower from 1.1422 to 1.1168 on June. This may suggest a danger of a deeper correction in the coming days (possibly as far as 1.1475-1.1530). Upside for the pair includes 1.1934 and 1.2000, a break of which would open the way towards even higher levels of 1.24-1.25 by September.”
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