EUR/USD: The bank MUFG reduced its forecasts in the face of the risk of the coronavirus

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The pair EUR/USD has briefly and timidly tested the psychological support key 1.10 on 28 and 29 January, but this has not led to acceleration to the downside significantly, while the subsequent rebound was stopped before the psychological threshold of 1.11.

Overall, the trend of the EUR/USD seems to become more and more uncertain in the short term.

This is also confirmed by the bank’s analysts MUFG in a note published today, and in which they forecast that the pair EUR/USD will trade in the range of 1,0800/1,1300 during the first quarter of 2020, and then around 1,1200 in the second quarter, before finally progressing to 1.14 in the fourth :

“Our basic hypothesis for an increase of the EUR/USD this year this year, based on a macroeconomic context which is relatively better for the euro area and the United States, was undermined in January by the escalating downside risks to global growth due to the spread of the coronavirus.

Economic activity in China and Asia is threatened in the short term, the importance of exports to this region for Germany has hurt the euro. It is impossible to predict the outcome of this risk, but at the time we write these lines, it seems serious enough to warrant a downward adjustment of global growth and a lowering of our forecast of EUR/USD for the first and second quarters.

Most of the indicators of the business climate (but not the IFO) have revealed a rise in sentiment, which was also evident at the global level, suggesting a reversal of the situation after a global slowdown of the manufacturing industry of nearly two years. We believe that this will have positive implications for the euro if this reversal continues to develop”.

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