EUR/USD: Morgan Stanley expects short-term rise to 1.15, but maintains its downward forecast of 1.05 by the end of the year

In a note published today, Morgan Stanley notes that the EUR is entering a period of respite within its downtrend. The bank now declares itself to be "tactically bullish" on the single currency and advises traders to buy the EUR/USD on dips.

"The outgoing investment flows of the euro zone since the beginning of the year and the use of the EUR as a global funding currency for portfolio investments as well as for long-term investments have constituted determining factors for the EUR's decrease since the beginning of the year.

With the decline of these outflows from the euro zone, the current accounts of European countries will increasingly benefit from surpluses, which could support the EUR.

In this context, we believe that the EUR/USD could rebound to 1.15 in the short term. On the other hand, we also maintain our bearish outlook for the year's end, with a target at 1.05."