Economists at Société Générale analyze EUR/USD outlook.
200-WMA at 1.1184 should cap upside in the near term
August seasonality was negative in four of the last five years. The negative seasonality cannot be overlooked for the direction of EUR/USD in August.
Fundamentally, with European growth lagging the US and Treasury yields holding firm, selling the dollar continues to be a risky strategy. A second downward surprise for US CPI on August 10 could dampen positive dollar momentum but investors may reserve judgment until the Fed Symposium in Jackson Hole in late August.
Even after the correction last week, EUR/USD remains tactically expensive vs 2y2y forwards and 10y real rate differentials. The 200-WMA at 1.1184 should cap upside in the near term.
