EUR/USD: Upside Seen Limited - UBS
UBS analyst team still think the Fed will hike rates this year, which should shift US yields higher and support the USD, however they warn against opening positions ahead of the June 14-15 meeting.
“Today we closed our short EUR vs. long USD opportunistic recommendation at the stop-loss of EUR/USD 1.1400. The position was initiated on 26 May at EURUSD 1.1210. This position sought to profit from a shift of market expectations toward tighter US Federal Reserve policy, which should support the US dollar relative to the euro.”
“Disappointing US labor market data and a lower-than-expected ISM figure on Friday challenged our view. We still think the Fed will hike rates this year, which should shift US yields higher and support the USD. The US tightening risk and the unchanged easy monetary stance of the European Central Bank should also limit EUR/USD upside.”
“Technical considerations suggest the EUR/USD should top out somewhere between current levels and the May high of 1.16. But currency momentum is not going in our direction, and opening a new trade at current levels ahead of the Federal Open Market Committee announcement on 15 June appears inadvisable to us.”