EUR/USD: Risks skewed to downside from ECB and Fed policy updates – MUFG

The EUR corrected modestly lower against the USD over the past week. Economists at MUFG Bank analyze EUR/USD outlook ahead of ECB and Fed policy updates.

Higher trading range to hold

We continue to believe that EUR/USD has moved into a new higher trading range between 1.1000 and 1.1500. 

On balance, we believe that risks for the pair are skewed to the downside in the week ahead from the ECB and Fed’s policy updates. Assuming that the Fed does not signal that next week’s hike is the last in the cycle and the ECB does not strongly commit to one more hike later this year. However, support at 1.1000 should hold and provide an opportunity to build long positioning in anticipation of a move toward the top of the range in the coming months.