Synopsis:

ING highlights the potential for a sharp move higher in EUR/USD if the pair can break through the significant resistance around 1.1140. The euro's strength is bolstered by record-high eurozone balance of payments data, despite the dollar's dominance.

Key Points:

• Record Current Account Surplus:

  • June's eurozone current account surplus reached a record over EUR50bn, strengthening the euro's position.
  • The eurozone's balance of payments, combining the current account, foreign direct investment, and portfolio investment, is now the highest on record.

• Strong Euro Fundamentals:

  • The European Central Bank's trade-weighted euro is also at its highest level ever, reflecting the euro's strength against other currencies.
  • Were it not for the strong US dollar, EUR/USD would likely be significantly higher.

• Resistance Levels:

  • EUR/USD is currently facing strong resistance in the 1.1110/1140 range.
  • If this resistance is broken, the pair could see a sharp move higher due to the low volatility environment.

• Cautious Optimism:

  • ING is cautious but reluctant to fight the EUR/USD uptrend, especially with the US economy slowing and the possibility of a Fed rate cut in September.

Conclusion:

ING sees the potential for a sharp move higher in EUR/USD if the pair can break through the key resistance around 1.1140. The euro's strong fundamentals and a slowing US economy could support this upward trend, particularly ahead of the anticipated Fed rate cut in September.