The EUR/USD is about to post the lowest weekly close in two months. According to analysts at MUFG Bank, the US Dollar has room to rise further versus the Euro, potentially toward the 200-day Moving Average, currently around 1.0330.

Room for USD rebound to extend further

“The pair has broken back below the 1.06000-level over the past week and we expect it to fall back towards support from the 200-day moving average that comes in at around 1.0330.”

“The recent move lower in EUR/USD has been mainly driven by the USD leg. Stronger US activity data combined with firmer inflation at the start of this year is encouraging market participants to price in a more hawkish outlook for Fed policy.”

“While euro-zone activity data it still surprising to the upside on balance, the scale of upside surprise is beginning to diminish. The EUR failed to strengthen on the back of the stronger PMI surveys over the past week, and there was a downward revision to German GDP in Q4 revealing a larger contraction.”