Euro: Overvaluation and energy risks weigh against US Dollar – MUFG
MUFG highlights the challenges facing the Euro amid its structural overvaluation and energy-related risks, which are expected to act as a counterbalance to the US Dollar's strength. This perspective suggests a potential mean-reversion in the EUR/USD rate, hinting that the current market price of around 1.1420 is elevated relative to long-term valuations. As such, traders should consider these dynamics as they influence positioning ahead of key European economic data releases.
Where it sits in our coverage
Our consensus target for EUR/USD sits at 1.1700 (median across firms), with firms like Morgan Stanley and MUFG projecting higher targets of 1.2000 and 1.1800 for March 2026, reflecting a bullish outlook. Conversely, TMGM and Danske Bank provide more conservative targets of 1.1448 and 1.1866 respectively, creating a range that underscores the uncertainty surrounding Euro valuation in light of energy risks.
How firms align
MUFG's forecast aligns closely with our consensus, positioning their March 2026 target at 1.1800. Meanwhile, firms like JPMorgan also share a similar technology stance of 1.1800, indicating a broader support for a bullish EUR/USD outlook. (See our report on [mufg]( /research/mufg) and [jpmorgan]( /research/jpmorgan).)
What the data shows
Recent revisions from Deutsche Bank and ING suggest strengthening bullish sentiment, with their March 2026 targets revised to 1.1800 and 1.1700 respectively. For further details on these dynamics, refer to our report [research/eurusd-ecb-rate-path]( /research/eurusd-ecb-rate-path).
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01MUFG sees structural overvaluation and energy risks weighing on the EUR.
- 02Expect mean-reversion risk for EUR/USD to 1.1800 by March 2026.
- 03Traders should focus on energy market dynamics as a critical factor.
- 04Key monetary policy decisions may shift forecasts.
Market implications
Investors should monitor upcoming EU economic data, especially relating to energy prices, as they could be pivotal in driving the Euro's movement against the Dollar. With our consensus target at 1.1700, any significant upside or downside movements could alter the current risk profile significantly.
Risks to this view
A significant decline in energy prices or a more hawkish shift in US monetary policy could undermine current forecasts and prompt a reevaluation of the EUR's valuation, potentially leading to a stronger USD in the near term.
Sentiment by currency
USD EUR+JPY~GBP~Composite USD score: -0.55
Firms mentioned
Sources & References
How we cover this story
Other coverage on this pair
Euro: Upside bias needs confirmation above 1.1615 against US Dollar – UOB
EUR/USD Price Forecast: Struggles at 1.1600, dives below 100-day SMA
Break below 100-day SMA signals technical momentum shift lower in EUR/USD; watch 1.1550 as next support level for continuation of downtrend.