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Sep 25 - 02:55 PM

MUFG: EUR Set to Break Through Key Levels as USD Selling Momentum Accelerates

By eFXdata  —  Sep 25 - 02:00 PM

Synopsis:

MUFG highlights a shift in FX dynamics following the Fed's 50bp rate cut, with the dollar weakening and the euro poised for a breakout.

Key Points:

  1. Initial Mixed Reactions:

    • Following the Fed's rate cut, the dollar initially strengthened but has since declined, with the DXY index hitting a closing low not seen since July of last year.
  2. G10 Currency Performance:

    • The euro and Swiss franc lag behind other G10 currencies, with low-yielders generally underperforming in risk-on environments. The NZD has emerged as the top performer among G10 currencies since the Fed's announcement.
  3. Key Resistance Level:

    • The euro is approaching a critical resistance level at 1.1200, having tested this mark three times recently. A breakout could lead to further gains, potentially reaching last year's high at 1.1276.
  4. Influence of Chinese Stimulus:

    • Recent stimulus measures from China are expected to bolster the euro and contribute to USD selling momentum.

Conclusion:

With the dollar showing signs of weakness and the euro on the verge of a breakout, traders should monitor the 1.1200 level closely, as a breach could accelerate buying interest in the euro.

Source:
MUFG Research/Market Commentary

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