EUR/USD: A Break Of 1.18 Could Trigger Further Liquidation Of USD Longs - MUFG
MUFG Research discusses EUR/USD outlook and adopts a bullish bias in the near-term.
"The reversal of US dollar strength has caught the market by surprise. Leveraged funds are still positioned heavily long the US dollar. A break above the 1.18000-level could trigger a liquidation of long US dollar positions and reinforce the current upward momentum for EUR/USD.
The main focus in Europe in the week ahead will be ongoing budget discussions between the Italian populist government. Recent comments from government officials have provided reassurance that the planned fiscal expansion is likely to be more modest than feared in 2019." MUFG notes.
"However the main market focus in the week ahead will be the Fed’s latest policy meeting. The Fed is expected to raise rates again and signal another hike should be forthcoming in December as well. If the Fed signals more concern over building trade tensions between the US and China it could weigh further on the US dollar. Yet if the Fed continues to concentrate more on building domestic inflation risks, it should provide more support for the US dollar," MUFG adds.
