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#1 11-04-2019 08:45:21

johnedward
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EUR/USD: Watch out for negative shocks against the euro (MUFG)

EUR/USD: Watch out for negative shocks against the euro (MUFG)


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MUFG Research discusses the outlook for the EUR/USD and warns that the pair is still vulnerable to negative shocks despite its recent stabilisation.

"The euro posted a modest rebound early this week after failing again under key support at the 1,1200 level. It could reflect some easing of short speculative positions on the euro, which have reached their highest level since December 2016. At that time, the euro was forming a market trough against the US dollar just below the 1.0500 level," MUFG notes.

"Further negative shocks may be necessary to materially weaken the EUR. The most immediate is the risk of a Brexit without agreement at the end of this week. The euro's current low level of implied volatility indicates that market participants factor in a very low risk of a Brexit without an agreement this week. The possibility of a further escalation of trade tensions between the US and the EU could also generate a negative shock for the euro. Recent news on this front has been negative after the US announced that it could impose new taxes on $11 billion of imports from the EU, including on civil aviation and agricultural products," MUFG adds.


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