It has been a strong week for EURUSD, driven by weaker US data and a more hawkish European Central Bank, leading the EUR/USD bond spread back to levels last seen in 2020. The FX market has been adding to long positions throughout the week, bringing spot back to a one-year high. After the weaker US retail sales on Friday, the first signs of profit-taking ahead of the weekend started to emerge; some might say this is unsurprising given the performance over the last few days. I would assume this is more a function of de-risking rather than a change of fundamental view. I still expect dips to be bought into eventually, 1.1000-10 first mild support ahead of 1.0950-70 crucial support zone.
- UBS Strategy
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