ING analyst Francesco Pesole forecasts a significant risk that the EUR/USD currency pair will need to test the 1.140 level due to ongoing post-Fed US Dollar momentum before any potential recovery in the euro can occur [1]. Pesole notes that while the US Dollar remains dominant, positive developments in US-Iran negotiations and a recovery in the eurozone's commodity terms of trade—now more than halfway back from their initial war-related decline—should help limit further downside for the euro [1].
Upcoming eurozone confidence data and Purchasing Managers' Index (PMI) releases are scheduled for today and tomorrow, but ING does not expect these surveys to be major drivers for EUR/USD at this time [1]. Pesole points out that these data releases may not yet capture the effects of the interim peace deal and could still reflect a less optimistic sentiment in the eurozone [1].
Overall, ING maintains that the EUR/USD exchange rate is currently being driven primarily by US Dollar factors, with eurozone-specific data playing a secondary role in the near term [1].
CONCLUSION
ING anticipates that EUR/USD could test the 1.140 level as post-Fed US Dollar strength persists. However, positive US-Iran headlines and improved eurozone terms of trade may help contain further euro downside. Near-term eurozone data is not expected to significantly influence the currency pair.