EUR/USD: Turkey risks could trigger overdue correction lower for the euro – MUFG

Analysts at MUFG Bank, consider a short-term tactical trade idea to reflect the increasing risk of a correction lower for the EUR/USD in the near-term. They see a target at 1.1600 and a stop loss at 1.1950.


Key Quotes:


“EUR/USD has surged higher by almost 7% since June. It has resulted in the USD becoming heavily oversold thereby increasing the risk of a correction lower. The sharpening sell off in the Turkish lira over the past week could provide the catalyst to trigger a correction lower for the EUR. The euro underperformed during the lira currency crisis in 2018 which highlights downside risks going forward if history is repeated.”


“There is building concern over the renewed spread of COVID-19 in Europe which could take some shine away from the EUR.”


“We are wary though of the risks that the USD could remain under selling pressure ahead of Jackson Hole later this month so have set a tight stop. For those still concerned by further USD selling, a short EUR/JPY position could offer more attractive risk reward.”