#SaxoStrats: EURUSD could slide to 1.1000
EURUSD has consolidated from recent lows, but the rally has lacked much bite, as the background developments continue to point south for the pair, driven mostly by the Fed’s renewed hawkish guidance in recent weeks, but also supported by a a comeback in risk appetite, which keeps carry differentials at the top of the agenda.
With Europe’s negative rates and a long road of European Central Bank QE stretching out for years ahead while US rates head higher, EURUSD is under pressure to fall farther within the large 1.06-1.15 range that has contained the action since early 2015.
Next week is the critical test for USD pairs through Friday’s US employment report, but there may be room for EURUSD to dip all the way to 1.1000 before that even.
Management and risk description
The key risk to this trade is a shift in sentiment on the US dollar, perhaps driven by US data points ahead of the main event next Friday. A sudden reversal in risk appetite is another potential source of risk.
EURUSD one-year chart
EURUSD five-year chart
— Edited by Martin O'Rourke
Non-independent investment research disclaimer applies. Read more