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MUFG analysts have reaffirmed their bearish outlook on the EUR/USD pair, citing a significant negative terms-of-trade shock driven by surging oil and natural gas prices. The Eurozone's reliance on energy imports makes it particularly vulnerable to higher commodity costs, which erode purchasing power and weigh on economic growth. This dynamic is expected to persist until energy prices stabilize or the ECB implements aggressive monetary tightening to counter inflation. For traders, this analysis highlights the critical role of energy markets in shaping EUR/USD trends. Rising oil prices often trigger a shift in capital toward USD-denominated assets, especially when the U.S. Federal Reserve maintains a hawkish stance. The divergence in monetary policy between the ECB and Fed could widen, creating further downward pressure on the Euro. Additionally, energy-dependent economies in the Gulf and MENA region may face indirect risks as higher oil prices impact global trade flows. Looking ahead, investors should monitor the ECB's response to inflationary pressures and the trajectory of global oil prices. Key levels to watch include EUR/USD support at 1.05 and resistance at 1.10. Broader macroeconomic data, such as Eurozone CPI and U.S. non-farm payrolls, will also influence the pair's direction. The interplay between energy markets and central bank policies will remain pivotal for EUR/USD positioning.
