EUR/USD: Rally to fizzle out soon, validating new range of 1.08-1.12 – TDS

EUR/USD needs a string of positive news flow on the ECB/Fed, fiscal support, and oil prices to break through 1.12. But for now, economists at TD Securities support the emergence of a 1.08-1.12 range.

EUR/USD needs a string of positive newsflows to keep the rally going

“There are three critical EUR drivers to keep on the radar screen in the weeks ahead: ECB/Fed, fiscal, and oil. For the EUR to build on the recent gains, it will require all three of these forces to work in the same, positive direction. The ECB offers one level of support, which should help to reinforce recent stability, though probably not enough to push EUR/USD through 1.12.”

“For now, we think EUR/USD holds the 1.12 resistance, validating the new range of 1.08-1.12.” 

“The fiscal outlook matters more for the medium-term outlook (months rather than weeks) while the geopolitical stress and trade shock are more immediate. A fiscal package plus ECB normalization reinforces our medium-term view that EUR/USD recaptures 1.20 next year.”