Euro: Downside bias builds into NFP against US Dollar – MUFG
MUFG highlights a growing downside bias for the Euro against the US Dollar in light of impending NFP data, which suggests that stronger-than-expected employment figures could bolster USD sentiment and widen the policy divergence between the Fed and ECB. As the market positions ahead of this critical data release, the potential for EUR/USD to experience volatility is increasing. The current sentiment reflects a bearish outlook on the Euro, reinforcing expectations of improved USD performance amidst a supportive labor market backdrop.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.1700 (median across firms), with Deutsche Bank at the upper bound (1.2500) and Citi at the lower bound (1.1100). MUFG's current position aligns with the consensus as they forecast 1.1800 for March, suggesting further downside potential exists.
How firms align
Aligned with MUFG's bearish outlook, JPMorgan and Goldman have both set moderate targets for March at 1.1800, reflecting similar sentiment. Conversely, firms like Scotiabank maintain a more cautious stance with a March target of 1.1734, indicating a less pronounced bearish perspective. For a comprehensive view, see /reports/jpmorgan and /reports/goldman.
What the data shows
Recent revisions indicate a consistent bearish attitude toward the Euro, notably from Scotiabank, which revised down its December target to 1.2200. Our published research at /research/eurusd-ecb-rate-path notes that EUR/USD currently trades 4.82% below the December consensus of 1.200, underscoring potential vulnerability ahead of NFP.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD vulnerability observed ahead of US NFP; current spot at 1.1700.
- 02Traders should watch for volatility post-NFP data.
- 03Bearish USD sentiment may extend if NFP results exceed expectations.
- 04Positioning signals ahead of employment data suggest heightened risk for the Euro.
Market implications
Traders should closely monitor the upcoming NFP release, as stronger employment figures could see EUR/USD breach immediate support levels around 1.1700. Consensus positioning remains at 1.1700, suggesting that any significant deviation in the data could exacerbate Euro weakness.
Risks to this view
Should the NFP data come in weak or below expectations, this could reverse current bearish sentiment towards the Euro, pushing the pair back towards resistance levels above 1.1800. Additionally, any unexpected ECB hawkish signals could challenge current USD strength.
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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