EUR/USD could come closer to 1.10 on disappointing US data – SocGen

The Euro had a great second week of the year. Economists at Société Générale expect EUR/USD to test the 1.10 level on disappointing US data this week.

Retracements likely to be viewed as a buying opportunity

“Both EUR/USD and EUR/GBP are expensive based on 2y2y rate differentials but retracements are likely to be viewed as a buying opportunity.” 

“The less downbeat view on the European economy (no contraction in 4Q GDP?), the inflows into stocks, the prospect of a narrowing Fed/ECB rate differential and improving demand from China all bode well for the single currency over the medium term.”

“Disappointing US retail sales and soft PPI on Wednesday would further cement the case for 25 bps by the Fed next month and guide EUR/USD closer to the next resistance levels at 1.0940 and 1.10.”