- Euro bounces off 2-week lows at 0.9680 to break back above 0.9700.
- The pair tries to establish a bottom after a 5-day reversal.
- EUR/USD could reach 0.90 by the end of the year – MUFG.
The euro’s reversal from the 0.9750 zone earlier in the US session found firm support above the two-week low at 0.9680 and the pair EUR/USD it trades back above 0.9700.
Consolidate losses at 0.9700 after a 5-day reversal
The euro appears to have found support at 0.9680, gathering strength after a five-day downtrend that has pushed the common currency around 3% below last week’s high of 1.0000.
A German government source has recently denied an earlier Bloomberg report pointing to German support for a joint EU debt plan to deal with the energy crisis. These rumors offered a new impetus for the euro to rise towards 0.9750.
On a broader level, investor concerns about the escalation of the war in Ukraine, after Russia launched the biggest attack since the start of the war, coupled with the impact of rising oil prices, are undermining confidence in the eurozone’s economic prospects and weighing on the euro.
Elsewhere, the US dollar remains widely offered ahead of the Federal Reserve’s monetary policy meeting scheduled for next Wednesday. The US jobs report, released last Friday, showed that the US economy remains strong despite growing global uncertainty. Against this background, the market is considering a new rise in interest rates by the Fed, which is supporting the demand for the dollar.
EUR/USD could reach 0.90 by the end of the year – MUFG
Currency analysts at MUFG maintain their bearish outlook for the pair in the coming months: “The key to any broad turn in US dollar strength needs to be a pause in the tightening cycle. We suspect the Fed will pause after December’s rally, which should allow for some EUR/USD correction from levels closer to 0.9000.”
Technical levels to watch
Source: Fx Street
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