At the moment, most movement in EUR/USD is US Dollar (USD) driven, and he cited the reasons for this. But, let focus a little more on the euro side. Because this week could get uncomfortable for the euro, Commerzbank’s FX analyst Antje Praefcke notes.
Risks in EUR/USD to remain tilted to the downside
“Several heavyweights from the ECB will be commenting on the situation over the course of the week, with many of them speaking out as early as today. If they sound dovish, the market is likely to feel confirmed in its euro skepticism. This is also not good news for the euro, which yesterday slowly fell back towards the 1.08 level.”
“I find it hard to imagine that the PMIs could turn out so badly or the comments from the ECB could be so dovish that these expectations are given another significant downward push, putting the euro under massive downward pressure. Yes, maybe a serious test of the 1.08 mark is possible, with a few pips below towards 1.0780. But I don’t see much more than that at the moment.”
“The Euro may fall again this week, but it should not get knocked out. On the contrary, if the market comes to the realization in view of the PMIs that it may have gone a bit too far in its expectations, the euro may even stand up again on the mat. But then there is also the dollar side. Therefore, the risks in EUR/USD should remain tilted to the downside until the rosy picture of the US economy gets scratched.”
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