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28.06.202307:48 विदेशी मुद्रा विश्लेषण और समीक्षा: EUR/USD. Analysts highlight 4 reasons not to buy EUR

Exchange Rates 28.06.2023 analysis

Currency strategists thoroughly analyze global trends and make new forecasts for the EUR/USD pair. What to expect from the pair and which currency will prevail? They are also curious about the future moves of top central banks.

Yesterday, investors digested fresh macro stats which indicated the resilience of the US economy. The recovery in the real estate market has been fueled by a rise in new home sales and the limited supply in the secondary real estate market.

Durable goods orders exceeded expectations for the third month in a row. Despite constant predictions about the looming recession, recent macroeconomic data did not confirm the gloom and doom scenarios.

New home sales increased by 12.2% on a monthly basis. In annual terms, the figure reached 763,000, the highest level since February last year.

Durable goods orders rose by 1.7% in monthly terms in May 2023. In April, the indicator was upwardly revised by 1.2%. These figures surpassed forecasts of a 1% decline.

Sentiment on Wall Street improved as well. On Tuesday, the US dollar index was trading in the red. On Wednesday it rose slightly. It faced strong bearish pressure after it broke through the 103 level last week.

The US dollar may slide to June lows near 102.00. A breakout of this level could lead to a fall to the April and May lows near 101.00.

Exchange Rates 28.06.2023 analysis

There is a likelihood of a decline to 100.80. This is the most pessimistic forecast. As the Fed said it would not cut rates this year, the US dollar has no fundamental reasons for a rapid decrease.

ABN Amro economists have revised their forecast on the US dollar. They are now predicting a recession in the fourth quarter and a rate cut in the first quarter of 2024.

They expect another 25 basis point rate hike at the July meeting and no rate cuts this year. The Fed is projected to lower the interest rate significantly s in 2024. Analysts believe that the regulator could cut the key rate by 175 basis points a year.

It is bullish for the US dollar. Analysts at ABN Amro are confident that their forecasts coincide with the general market expectations.

Nevertheless, it seems very difficult for the US dollar to compete with the euro. The EUR/USD pair advanced on Tuesday, breaking through the 1.0950 level.

Exchange Rates 28.06.2023 analysis

At the moment, the euro is supported by the repayment of loans by eurozone banks scheduled for Wednesday under the fourth TLTRO-III auctions.

However, the euro will not lose ground immediately after this event. The last time banks repaid debts to the ECB was at the end of March. The EUR/USD did not decrease in April.

Analysts assume that the pair could grow above the 1.1100 level.

A rise to the May highs and Stop Loss orders above this level could trigger an upward movement to 1.1200.

At the same time, OCBC Bank believes that the euro will maintain a strong bullish bias amid the ECB's hawkish policy and stable economic growth in the eurozone.

However, analysts at ABN Amro highlighted four reasons for the bearish forecasts on the EUR/USD.

Firstly, they no longer expect rate cuts by the Fed this year and assume fewer cuts in 2023-2024. This will have a positive effect on the US dollar.

Secondly, if the ECB starts cutting rates in December, the euro will lose momentum.

Thirdly, the ECB's aggressive easing in 2024 will put more pressure on the euro than the Fed's rate cuts on the US dollar. This is due to the fact that the markets were already expecting significant rate cuts by the Fed, but not the ECB.

Last but not least, speculative positions on the euro are extremely high.

Thus, they suppose that the EUR/USD pair will hit 1.0800 by the end of this year and 1.0500 by the end of next year.

Natalya Andreeva,
Analytical expert of InstaSpot
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