On Tuesday, the Euro/Dollar exchange rate fell to the support of 1.1780. The deterioration of the global epidemiological situation provoked an increase in demand for the US currency, which is a traditional protective asset. Since May, the Euro/Dollar exchange rate has declined by 3.5% and dropped below the important support of 1.1800.
Bloomberg analysts believe that in the event of a break below the technical target for the pair will be the area of 1.1000. All this forces large speculators, such as hedge funds, to sell the single currency. Last week, their net long position on the euro fell to the lowest values since March 2020, when most risky assets formed multi-year lows after a sharp collapse.
Bank of America also maintains a negative outlook for the euro. The currency should weaken, but the downward movement will be uneven, as the ECB will need time before clarifying its monetary policy plan after reviewing the strategy. Earlier in July, the ECB announced that it would change its inflation target, but this does not matter much for the euro without specifying policy measures, Bank of America analysts say. The European regulator is likely to gradually announce the details of monetary policy, starting with more detailed recommendations at a meeting on Thursday. No actual changes are expected yet.
In our forecast, we expect a further decline in the Euro/Dollar exchange rate to the levels of 1.1760, 1.1730 and 1.1700.