EUR/USD to move back to the lower half of the 1.17/1.18 range – ING

EUR/USD has retreated from 1.18 amid the worsening mood. In the week ahead, the pair is set to trade back at the lower half of the 1.1700/1.1800 range, according to economists at ING.

See: EUR/USD to nosedive to 1.12 in 2022 on stark Fed/ECB contrast – SocGen

Friday's rally should not have legs

“We doubt that the jump in EUR/USD on Friday to the 1.1800 level was the start of a more extended rally.”

“Not only do we continue to expect some pressure on the pair coming from a strong dollar in the short term, but the EUR also seems to be lacking strong bullish drivers: the ECB’s ultra-dovish stance is generating a stark policy divergence with the Fed, and any stabilisation in sentiment – paired with the low-volatility FX environment – may see the EUR suffer from its funding character if interest for carry trades re-emerges.” 

“We are inclined to think EUR/USD risks remain skewed to the downside this week, and we could see the pair moving back to the lower half of the 1.1700/1.1800 range.”