• The euro bounces up above 2-week lows at 0.9680 to return past 0.9700.
• The pair attempts to set a bottom after a 5-day reversal.
• EUR/USD could reach 0.90 by year-end – MUFG.

Euro’s reversal from 0.9750 area earlier on Monday’s US trading session found support tight above the two-week low at 0.9680 and the pair is now trading above 0.9700 again.

Consolidating losses at 0.9700 after a five-day reversal

The euro seems to have found support at 0.9680, to gather strength following a fie-day downtrend that has pushed the common currency about 3% lower from last week’s peak at 1.0000.

A German Government source has recently denied an earlier report by Bloomberg pointing out to German support to a joint EU debt plan to tackle the energy crisis. These rumours offered a fresh impulse to the euro to climb towards 0.9750.

On a bigger picture, investors’ concerns about the escalating war in Ukraine, after Russia launched the biggest attack since the start of the war, coupled with the impact of higher oil prices are undermining confidence in the Eurozone economic prospects and weighing on the euro.

Furthermore, the US dollar remains bid across the board ahead of the Federal Reserve’s monetary policy meeting, due next Wednesday. The buoyant US employment report released last Friday showed that US economy remains solid despite the increasing global uncertainty. In this backdrop, the market is pricing in another aggressive Fed rate hike, which is underpinning demand for the USD.

EUR/USD could reach 0.90 by year-end – MUFG

Currency analysts at MUFG maintain their bearish perspectiveds for the pair on months ahead: “The key for any broad turn in US dollar strength must be a pause in the tightening cycle. We suspect the Fed will pause after hiking in December which should allow some EUR/USD correction from levels closer to 0.9000.”

Technical levels to watch