MUFG Sees EUR/USD Recovery to 1.1800 on Confidence Improvement
MUFG expects EUR/USD to recover toward 1.1800 as improving business confidence and resilient industrial production reduce downside risks for the euro.
MUFG forecasts that EUR/USD will recover toward the top of its year-long range at 1.1800 as improving economic data and fading energy shock support the euro.
The pair is currently trading near the lower end of its 1.1400-1.1800 range, having been under sustained selling pressure from the energy crisis and diminishing expectations for further ECB rate hikes. However, recent data showing improving business confidence and unexpectedly resilient industrial production suggest the worst of the growth slowdown may be passing. This reduces downside risk for the euro in the near term and opens the door for a recovery.
For forex traders, the outlook for EUR/USD hinges on the interplay between eurozone fundamentals and ECB policy. A faster-than-expected unwinding of the energy shock, combined with the prospect of one more ECB rate hike in September, points to scope for the pair to recover toward 1.1800 rather than break lower. Traders can monitor real-time EUR/USD quotes on NowPrice to track the move. The key risk remains a renewed energy crisis or a sharp deterioration in global risk sentiment, which could cap the euro's upside.
Looking ahead, markets will focus on upcoming eurozone inflation and GDP data, as well as any ECB commentary on the rate path. A break above 1.1600 would signal near-term bullish momentum, while a failure to hold above 1.1400 could reignite downside risks. MUFG's base case is for a gradual grind higher toward 1.1800 over the coming weeks.