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Sep 08 - 01:55 PM

EUR/USD - COMMENT-For EUR/USD Longs 1.0700 May Remain Magnetic For Only So Long

By Christopher Romano  —  Sep 08 - 10:00 AM

EUR/USD gave up most earlier gains Friday and traded near flat as the magnetic attraction of the 1.0700 level constrained the market, but downside influences from China and yield differentials should keep the prospects for lower levels alive.

Despite China's efforts to stimulate its economy, investors remain concerned about growth.
Investors are shunning Chinese assets and assets seen as proxies for economic growth.

USD/CNH struck an 11-month high Friday and longs only have the 2022 yearly high as a final impediment to the psychological 7.5000 level.

Drops in iron-ore DCIOc2 and copper HGv1 futures are indications China and global growth may be stumbling.

Europe's dependency on China for growth are bad news for the euro area economy and the euro.

Markets increasingly see weak euro area data as a risk factor that could prevent the ECB from hiking next week.

The downbeat data has helped the dollar maintain its yield advantage over the euro and even increase it slightly after it had diminished.

Risks from the Fed holding rates higher for longer or possibly hiking further on the risk of inflation reigniting may keep EUR/USD bulls corralled.

The prospect for EUR/USD to fall toward 1.0500 remains elevated.

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Refinitiv IFR Research/Market Commentary


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