EUR/USD: ‘There’s A EUR/USD Floor But We Also See Upside Limitations’; Staying Short – TD

What is the outlook for EUR/USD?

Here is their view, courtesy of eFXdata:

TD Research discusses EUR/USD outlook and flags 1.25 as a strong barrier over the coming weeks. TD is short EUR/USD targeting a move towards 1.18.

“Asia’s export-generated surplus has created an excess of USDs that their central banks are using to swap into other major currencies. This diversification process should establish a new EUR floor. Yet, a move above 1.25 will need the support of cyclical drivers,” TD notes.

“Another underappreciated aspect falls to the perceptions of relative balance sheet growth. Fed liquidity is supporting real low rates, but the ECB’s balance sheet is now growing faster…The implication is that the EURUSD has started to overshoot one of the pair’s core monetary drivers. Given the relative growth outlook outlined throughout, it’s likely these dynamics should also anchor EURUSD upside potential,” TD adds.

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