EUR/USD: new range? – Rabobank

For most of this year, EUR/USD has been bounded by a range of 1.10 to 1.06. Over the past few sessions, the currency pair has largely held levels above 1.10, raising the question of whether a new range is in the works, notes Jane Foley, Senior FX Strategist at Rabobank.

EUR/USD to trade in the 1.09/1.10 range

“As we argued earlier this month, we see upside risks to EUR/USD likely to be associated with a weaker USD rather than a generally stronger EUR. These could be linked to a weaker-than-expected US economy, which would have implications for Fed rates, or a Harris victory in the November election.

“This raises the question of whether Fed rate cut hopes are still overblown and the risk of a short-term downside risk below 1.10. The USD’s recent weakness may also reflect the view that interest in the “Trump trade” that followed the disastrous TV debate between Biden and Trump in June may have been premature, given Harris’ relatively better performance in the polls. “

“While Harris’ policies to boost capital gains and efforts to limit food price increases have not gone down well with free-market economists, they aim squarely at rallying support among consumers and could boost his position in surveys. Overall, while we cannot rule out another drop to the EUR/USD 1.08 area in the coming weeks, we expect the EUR/USD to 1.09/1.10 area to become more comfortable for EUR/USD in the coming months. “