EUR/USD to trade closer to the 1.10 in Q1 before drifting gradually higher – MUFG

Matías Salord FXStreet

Analysts at MUFG Bank expect the EUR/USD pair to trade in the 1.100-1.1650 range during the next weeks. They see the pair moving to the downside, before staging a gradual rebound after the first quarter.

Key Quotes:

“The pair has found more support closer to the 1.1000-level similar to between 2015 and early 2017, and more recently between late 2019 and early 2020. The price action fits with our view that the EUR has become more deeply undervalued against the US dollar which is helping to dampen further downside risks in the near-term.”

“Our long-term PPP model estimates that EUR/USD is currently trading around one standard deviation below fair value which comes in at around 1.1250. It was only back in the early 2000’s that EUR/USD traded at even more extreme levels of undervaluation for a more sustained period of time.”

“There is still room to price in more Fed hikes further out the curve and price in a higher terminal rate. Additionally, the Fed could announce plans to begin shrinking their balance sheet sooner and more quickly than in the last tightening cycle. As a result, we still expect EUR/USD to trade closer to the 1.1000- level in Q1 before drifting gradually higher later this year.”

“One potential trigger for a weaker EUR in the month ahead is posed by rising geopolitical tensions between Russia and the West.”

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

AUD/USD hangs near three-week low, below 0.6950 as traders await US NFP report

AUD/USD hits a three-week low during the Asian session on Friday as the RBA’s dovish shift and a rout in equity markets weigh on the risk-sensitive Aussie. However, the recent slump in US bond yields to a two-month low keeps US Dollar bulls on the back foot and limits losses for the currency pair as traders look to the US NFP report for a fresh impetus.

USD/JPY bounces off three-week low; keeps the red near 157.65 as focus remains on US NFP

USD/JPY bounces off the weekly low set during the Asian session, as bears turn cautious ahead of the US NFP report due later this Friday. The upside seems limited as the recent slump in US bond yields and hopes of Iran war de-escalation undermine the US Dollar. Moreover, a hawkish BoJ and intervention risks support the Japanese Yen, capping the pair.

Gold loses the grip; $4,000 comes next on the downside

Gold sets aside two daily advances in a row on Friday, opening the door to a potential test of the key $4,000 mark per troy ounce. The precious metal’s retracement follows a decent improvement in the sentiment surrounding the US Dollar, solid NFP data and higher US Treasury yields across the board.

Democrats win House and Senate in US midterms: Why isn’t all bad news for crypto

The biggest story this week was Tuesday’s US midterm elections, which saw Democrats win control of both the House and the Senate in a clear blue wave. This political shift in the US has triggered sharp price swings across the cryptocurrency market.

Week ahead – Inflation and geopolitics in focus as US political landscape shifts

Post-midterm election euphoria fizzles out as risk aversion prevails. US CPI, PPI and Fedspeak on the radar as Fed hike bets remain supported. Oil retreat pauses on mixed hopes about the ongoing conflicts.

US Dollar breaks below 101.50 as Democrats sweep Congress

The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.