MUFG warns the Euro is overvalued and vulnerable to underperformance due to energy-driven growth risks and inflation pressures.
EUR/USD remains capped near its 200-day moving average at 1.1630, with MUFG’s short-term model indicating the pair is 2.5%-3.0% overvalued. The bank highlights energy-driven growth risks and broader inflation pressures as key threats to yield support for the Euro.
The US Dollar Index (DXY) holds above its 200-day moving average at 99.185, limiting downside momentum despite recent easing in Fed rate hike expectations. A break below this level could accelerate a dollar turn, with EUR/USD’s equivalent resistance at 1.1630 acting as a critical barrier.
MUFG notes that worsening sentiment or economic activity tied to energy prices or inflation could erode Euro support. Today’s ZEW Expectations index may signal emerging downside risks for the currency in the coming months.