Euro: Testing support against US Dollar with ECB risk – Societe Generale
The euro is currently testing critical support levels against the US dollar, driven by uncertainty surrounding the European Central Bank's (ECB) upcoming policy decisions, as highlighted by Societe Generale. This sentiment creates a bearish outlook for the euro, especially as market participants weigh potential ECB rate adjustments against a strong dollar backdrop. The implications for EUR/USD are significant, and the current spot at 1.1679 juxtaposes recent forecasts from various institutions.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.1717 (median across 12 firms), with Commerzbank at the upper bound (1.1900) and Wells Fargo at the lower (1.1200). Societe Generale's recent target aligns with this consensus, placing the March forecast at 1.1700, emphasizing a reflective view amidst current market pressures.
How firms align
Several firms have adjusted their targets in relation to the ECB's policy risk, including BNPP, which projects 1.1600 for March 26 in contrast to Societe Generale's similar forecast. Firms like Mizuho and Barclays remain more optimistic, forecasting 1.1800 and 1.1700 respectively for March 26, as seen in our reports.
What the data shows
Recent upgrades from firms such as Morgan Stanley now place their March target at 1.2000, signaling a divergence in outlook as concerns over ECB policy loom. Further, our research denotes that EUR/USD trades 3% below the consensus figure of 1.20, emphasizing the current bearish tone as per /research/eurusd-ecb-rate-path.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD currently at 1.1679 is close to critical support levels.
- 02Watch for ECB signals; policy shifts could create volatility.
- 03Risk of support breach heightens if ECB shifts dovish.
- 04Look for divergence among firms as a potential trading opportunity.
Market implications
Next week, the ECB's policy decision could be pivotal, with the consensus target at 1.1717 indicating the market's positioning ahead of potential shifts. Traders should monitor the 1.1650 support level closely, as breaches could accelerate bearish moves.
Risks to this view
Should the ECB take a hawkish stance unexpectedly, it could invalidate the current bearish outlook for the euro. Specifically, indications of maintaining or raising rates could cause a rapid reversal in EUR/USD sentiment.
Sentiment by currency
USD+EUR-JPY~GBP~Composite USD score: +0.65
Firms mentioned
Sources & References
How we cover this story
Other coverage on this pair
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