EUR/USD: Performance of euro will be driven by developments overseas rather than the ECB – MUFG

Analysts at MUFG Bank, presented a trade idea for next week of shorting the EUR/USD pair at 1.1060, with a target at 1.0950 and stop-loss at 1.1120. They warn is a low conviction trade though given the time of year when fundamentals might matter less.

Key Quotes:

“We are moving toward year-end and hence getting into the period of trading when fundamentals often become less influential giving way to seasonal positioning flows into year-end. But it is hard to see euro performing well after the sharp drop in IP in Germany along with weaker than expected factory orders yesterday. Contrast that with the strong US employment report and we know Christine Lagarde’s press conference will be trickier than Jerome Powell’s. Technically, EUR/USD reversed lower after testing the trend-line resistance from the highs in June and November.”

“Furthermore, there is a risk factor next week that is difficult to predict – the outcome of the US-China trade negotiations. We expect the 15th December tariffs to be postponed but if markets start to fret on that, risk aversion could escalate and EUR funded positions could be liquidated, providing EUR will support.”