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Jan 24 - 09:55 AM

ANZ: Moves Above 1.05 in EUR/USD Represents Good Levels to Re-enter Outright Short Positions

By eFXdata  —  Jan 24 - 09:30 AM

Synopsis:

ANZ sees limited upside for the EUR/USD and considers any move above 1.05 as a good opportunity to re-enter short positions. Growth risks and diverging monetary policies between the euro area and the US continue to weigh on the euro.

Key Points:

  1. Growth Risks in the Eurozone:

    • Germany’s ZEW survey indicates persistent economic pessimism, with subdued current conditions and declining future growth expectations.
    • PMIs and Q4 GDP figures this week are likely to underscore the euro area’s economic vulnerabilities, especially if there’s a stark contrast with US data.
  2. Yield Spread Limitations:

    • While EUR/USD has diverged somewhat from yield spreads due to tariff risks, the divergence is marginal and points to limited upside for the EUR.
  3. Central Bank Divergences:

    • Differences in FOMC and ECB messaging during upcoming central bank meetings may further highlight monetary policy contrasts, capping EUR/USD gains.
  4. Positioning Normalization:

    • While the pair could consolidate as positioning normalizes, upside moves are seen as opportunities for shorts, especially above the 1.05 level.

Conclusion:

ANZ remains bearish on the euro near-term, citing weak euro area growth prospects and policy divergences with the US. They recommend re-entering outright short EUR/USD positions on any move above 1.05.

Source:
ANZ Research/Market Commentary

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