According to Chris Turner at ING, the EUR/USD currency pair rallied following a softer US CPI release, reflecting a positive reaction to lower-than-expected US inflation data. However, Turner cautions that rising oil and European natural gas prices are limiting the euro's upside potential against the US dollar, with European natural gas prices returning to levels last seen in mid-March [1].
Turner expects EUR/USD to struggle to break above the 1.1460/70 resistance area and warns that the pair could retreat toward the 1.1360/80 range if oil prices experience another increase. He notes strong demand for EUR/USD below 1.14, which could be attributed to a possible rotation into European equities as analysts raise expectations for European earnings. Despite this, flows into US-listed eurozone equity ETFs, such as the iShares MSCI Eurozone ETF, remain muted [1].
The report also highlights that a pro-risk environment, driven by lower prospects of Federal Reserve tightening, higher energy prices, and potentially lower volatility, may favor the carry trade. In this context, ING sets a one-month target of 11.05 for EUR/NOK, with the possibility of the move extending to 10.95 [1].
CONCLUSION
While the softer US CPI has provided some support for the euro, rising energy prices are capping further gains against the US dollar. ING expects EUR/USD to face resistance near 1.1460/70 and sees potential downside if oil prices rise further, with muted ETF flows suggesting limited investor conviction. The outlook for the Norwegian krone is more positive, with ING targeting further recovery.