EUR/USD edges down below 1.1720 lows but holds most of Thursday's gains
EUR/USD slipped back below the 1.1720 level in early trading, though it retained most of the gains from Thursday’s rally. The move appears to be a modest pullback within an otherwise resilient uptrend, with the pair still benefiting from broad dollar softness and improved risk appetite. The correction is orderly and so far lacks a clear catalyst, suggesting positioning adjustments rather than a fundamental shift. For now, the pair holds above key support at the 1.1680 area, keeping the bullish bias intact.
Where it sits in our coverage
Our consensus EUR/USD target for Mar26 stands at 1.1800 (median across 8 firms), with Morgan Stanley at the upper bound (1.2000) and Bank of America at the lower (1.1700). The current spot near 1.1500 implies a 2.6% discount to the median, a gap that has widened ahead of next week's ECB meeting. The pullback below 1.1720 does not materially change the divergence; the headline's 'holding gains' narrative aligns more closely with the upper third of our forecast range.
How firms align
Several firms with Mar26 targets at or above the consensus would view the dip as a buying opportunity. JPMorgan, Goldman Sachs, ING, MUFG, and Deutsche Bank all target 1.1800 or higher in the near term, supporting the constructive view. Conversely, BofA and Barclays are at the lower end (1.1700), with Morgan Stanley's 1.2000 target for Mar26 standing out as the most bullish, though their Dec26 target of 1.1600 introduces longer-term caution.
What the data shows
Our recent published research on EUR/USD consensus divergence highlights the disconnect between spot and median forecasts, with the current level 3.87% below the 1.22 Dec26 consensus. This gap suggests that either the market is pricing in additional headwinds, or the consensus will need to converge lower. The headline's resilience above 1.17 supports the latter scenario, but a break below 1.1680 would challenge that view.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD pullback to 1.1720 is modest and retains most of Thursday's gains, preserving the near-term bullish structure.
- 02Spot at 1.1500 trades at a 2.6% discount to the Mar26 consensus of 1.1800, leaving room for convergence.
- 03Watch the 1.1680 support level; a break below could signal a deeper correction toward 1.1600.
- 04Morgan Stanley's outlier Dec26 target of 1.1600 hints at potential downside risk beyond Q1.
Market implications
Next focus is ECB guidance on Thursday. A hawkish hold could propel EUR/USD back toward the 1.1800 consensus target. Conversely, a dovish tone might intensify the pullback below 1.1680, especially if US payrolls also surprise to the upside. The 1.1800 level, the Mar26 median, serves as key resistance.
Risks to this view
A decisive break below 1.1680 would invalidate the constructive view and likely trigger stops toward 1.1600. This could be catalyzed by a strong US jobs report or escalating trade tensions. Even if the dip holds, a failure to reclaim 1.1720 within a few sessions would signal waning momentum.
Sources & References
How we cover this story
Other coverage on this pair
EUR/USD strengthens as mixed US labor data and hopes for a US-Iran deal pressure the Greenback.
Soft US labor print reduces Fed rate-hike conviction; geopolitical risk-off from Iran talks risk-off flows weaken USD safe-haven demand.
EUR/USD: Recovery eyes full retracement – Scotiabank
EUR/USD recovery momentum suggests technicians are positioning for mean reversion toward recent highs, indicating potential USD weakness into resistance.
EUR/USD: Binary path around Gulf deal – ING
EUR/USD: Oil shock, real rates and conflict risks – Commerzbank
Oil shock transmission via real rates and geopolitical premium widens USD carry advantage; EUR structural support erodes as terminal rates diverge.
Cross-firm research
EUR/USD Trades 3.87% Below Consensus: What the Gap Reveals
EUR/USD spot at 1.1727 sits 3.87% below the eight-firm median Dec-26 target of 1.22, exposing a structural divergence that demands explanation.
EUR/USD Consensus at 1.22 While Spot Sits 3.87% Below
Eight sell-side firms hold a median Dec-26 target of 1.22 for EUR/USD while spot trades at 1.1727, a gap that demands explanation.