Within the year-to-date USD/JPY has traded in a mighty territory that has stretched nearly from 140 to 162. Against this EUR/USD has been caught between 1.06 and 1.10, Rabobank’s FX analyst Jane Foley notes.
Doable dangers for a split upper coming from a softer USD
“The lack of strong direction in EUR/USD is despite a wealth of news that has included prolonged weakness in Germany’s manufacturing powerhouse, a shift to the far-right in European politics (most notably France) and a ratcheting up of budgetary concerns in a number of Eurozone countries. In the US, expectations regarding Fed policy have swung markedly during the year as recession fears have risen and fallen.”
“Additionally, US politics has been a market driver which promises to bring a lot more direction both in the approach to the November presidential election and once the outcome is known. In addition to these factors, the risk of a safe haven bid from a potential escalation in Middle Eastern tensions has hung over the greenback this year.”
“The ability of EUR/USD to soak up all this news and remain range bound suggests that more of the same may be on the cards in the months ahead. We have removed our EUR/USD1.05 3-month target mostly on the view that imminent Fed rate cuts are likely to prevent a dip to this level this year. We also weigh up the factors that could push the currency pair above EUR/USD1.10.”
