Synopsis:
Morgan Stanley sees upside potential for EUR/USD toward 1.12, the top of its long-term range and a key resistance level. While rate differentials now align with current pricing, the pair still has room to catch up with equity-implied valuations. A potential overshoot could push EUR/USD beyond 1.11 and up to 1.12, though further confirmation is needed.
Key Points:
1️⃣ 1.12 as a Key Long-Term Resistance Level 📊
- EUR/USD approaching the upper bound of its historical range.
- Breaking above 1.12 would require stronger momentum.
2️⃣ Rate Differentials Now Priced In 💵
- EUR/USD has caught up to levels implied by rate spreads.
- Further upside would likely be driven by other factors.
3️⃣ Equity Market Signals Suggest More Room to Climb 📈
- Equity-implied models point to potential gains toward 1.11.
- A possible overshoot could push EUR/USD as high as 1.12.
4️⃣ Watching Market Reaction Before Calling a Breakout 🔍
- Morgan Stanley remains cautious on whether EUR/USD can sustain gains above 1.12.
- Market momentum and macro developments will be key.
Conclusion:
Morgan Stanley sees a potential EUR/USD move toward 1.12, with equity market signals supporting further upside. However, 1.12 remains a strong resistance level, and a sustained breakout is uncertain. Market developments will determine whether this level holds or gives way to further gains.
