EURUSD weekly chart
MUFG maintains a long EUR/USD position to its TOTW portfolio (spot ref:
1.0920), with a target at 1.1320, and a stop at 1.0620. MUFG also
maintains a long AUD/NZD position targeting a move towards 1.1200, with a
stop at 1.0700.
“We are maintaining a long EUR/USD trade idea. The pair retested the top
of this year’s trading range between 1.0500 and 1.1000, and we expect
the pair to move closer to the year to date high from April at just
below the 1.1100-level,” MUFG notes.
“We are maintaining our long AUD/NZD trade idea to reflect expectations
for narrowing policy divergence between the RBA and RBNZ,” MUFG adds.
MUFG sees three reasons why sustained strength in the USD is unlikely.
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Rebounding USD: The US dollar
US Dollar
The US dollar, (symbol $, code USD) is the fiat currency of the United States of America (USD) and the most widely traded currency globally. It was introduced into the US in the late 18th Century, with paper notes not being distributed until the following century. The US dollar, also informally known as the greenback, is the world’s most foremost reserve currency, due in large part to the importance of the US economy on the world stage. Once backed by gold (in the 1900’s), the USD is now a purel
The US dollar, (symbol $, code USD) is the fiat currency of the United States of America (USD) and the most widely traded currency globally. It was introduced into the US in the late 18th Century, with paper notes not being distributed until the following century. The US dollar, also informally known as the greenback, is the world’s most foremost reserve currency, due in large part to the importance of the US economy on the world stage. Once backed by gold (in the 1900’s), the USD is now a purel
Read this Term has rebounded and has been stronger against most G10 currencies
Currencies
Currencies are a typically a form of money in wide circulation, being the primary medium of exchange with respect to buying and selling goods and services. These are often issued by a specific government or collection of governments, by way of paper notes and coins. Other forms of currencies include previous metals such as gold and silver, and digital currencies such as Bitcoin. Currencies serve as a backbone of the country’s or countries’ economy, due to the perception of value held by the popu
Currencies are a typically a form of money in wide circulation, being the primary medium of exchange with respect to buying and selling goods and services. These are often issued by a specific government or collection of governments, by way of paper notes and coins. Other forms of currencies include previous metals such as gold and silver, and digital currencies such as Bitcoin. Currencies serve as a backbone of the country’s or countries’ economy, due to the perception of value held by the popu
Read this Term over the week following a
previous week of weakness. MUFG suggests that this pattern of alternating between strength and weakness could continue. - Tightening Cycles Uncertainty: The market has arrived at a stage in the
tightening cycles where it’s harder to determine how much further
tightening is necessary. This means that both central banks and markets
will become more sensitive to incoming economic data. For example, the
sharp depreciation of the EUR today was due to weak PMI data. - Potential Weakening of USD: MUFG maintains that there is a likelihood
that the Federal Open Market Committee (FOMC) will continue with its
pause in tightening, and if this happens, it could weaken the US dollar.
However, this assumes that there is no significant decline in growth
outside of the US. In other words, if upcoming US economic data supports
the notion of the FOMC extending its pause in tightening policy, gains
in the US dollar could be reversed.
In summary, MUFG suggests that the US dollar’s strength may not be
sustained in the longer term due to the uncertainty surrounding
tightening cycles and the sensitivity to economic data. They believe
that if the FOMC continues to pause its tightening, and if the economic
data supports this stance, it could result in a weakening of the US
dollar.
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