ING’s Francesco Pesole maintains a bearish bias on EUR/USD, noting markets have raised the bar for trading positive Middle East headlines. He highlights 1.1570 as key support and recalls the early-March break below 1.160. While positioning is more balanced, the macro backdrop has turned less supportive for the Euro (EUR) as rising USD rates widen EUR:USD swap spreads again.

Key support at 1.1570 in focus

"We still see risks skewed to the downside for EUR/USD, as markets appear to have raised the bar for trading on positive Middle East headlines. The next support to watch is 1.1570."

"On 3 March, at the start of the conflict, EUR/USD moved below 1.160 for the first time and gapped lower after breaking the 1.1570 mark."

"Positioning is now far more balanced, suggesting that the risk of abrupt technical sell-offs is more contained. However, the macro environment has clearly turned less supportive for the euro."

"The two-year EUR:USD swap spread has widened back to around -100bp, from a peak of -65bp in early April."

"The rise in USD rates is undermining risk sentiment and reversing the rate differential tightening that had provided a buffer for EUR/USD during the energy crisis."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)