An update on the euro via Citi

a number of negative risk events near term, which restrained the EUR

  • new Covid-19 spike in Europe and UK
  • Brexit tensions
  • US - China tensions,
  • future of phase 4 stimulus talks in US
  • an even more elevated US election uncertainty backdrop as President Trump contracts the coronavirus

EURUSD held good resistance between 1.1780 and 1.1790 (Trend lines and 55-day MA)

  • Good support remains at 1.1612 and a break below, if seen, would bring our minimum 1.15 target back into focus
  • More medium term, relative real rate differentials continue to make new local highs (almost back to zero in EUR less USD), reducing the relative attractiveness of owning US dollars for investors. We still believe that the medium - long term likelihood of EUR/USD breaking 1.20 remains high, particular as US real rates are unlikely to move materially higher given the Fed's fresh mandate. Besides, hard data showed that the economic recovery continues.