ANZ has adjusted its stance on EUR/USD from bearish to neutral, acknowledging the persistent economic challenges within the Eurozone, particularly in Germany and France. Despite recent data showing a strong uptick in German factory orders, underlying weaknesses in manufacturing and retail sales highlight ongoing economic difficulties. This environment supports market expectations of an imminent ECB rate cut, potentially as early as March or April. However, ANZ is cautious about adopting a bullish view on the EUR against G10 currencies, given these economic conditions and pending central bank actions. The EUR/USD is expected to stay below its 200-day moving average ahead of the US CPI release, with any significant move upwards seen as an opportunity to short the currency pair.
Economic Weakness in the Eurozone: Persistent challenges in major economies like Germany and France contribute to a cautious outlook, with recent data underscoring difficulties in manufacturing and retail sectors.
Market Pricing for ECB Rate Cuts: The anticipation of a 100% chance for an ECB rate cut in April, with March being a 50-50 proposition, reflects the market's response to the Eurozone's economic stagnation.
Neutral Stance on EUR/USD: While shifting from a bearish to a neutral bias on EUR/USD, ANZ remains hesitant to adopt a bullish view given the current economic and policy landscape.
EUR/USD Technical Levels: The pair is projected to remain below its 200-day moving average (1.079) ahead of US CPI data. A weaker-than-expected CPI could push EUR/USD up to 1.059, surpassing the 200-day moving average. However, the 50-day moving average (1.0897) is expected to act as a strong resistance level, presenting a potential opportunity to short EUR/USD.
ANZ's adjustment to a neutral bias on EUR/USD reflects a pragmatic response to the Eurozone's ongoing economic challenges and anticipated central bank actions. While recognizing potential short-term movements in the currency pair, ANZ advises caution and suggests that significant upward movements may provide opportunities for short positions.