The EUR/USD pair remains undervalued despite its recent rebound, with geopolitical developments expected to push the pair as optimism over a potential truce in Ukraine supports a move towards its short-term fair value near 1,170, notes Francesco Pisol, FX analyst at ING.
The Euro is driven by geopolitical factors with fair value approaching 1.1700
“With short-term fair value just above 1.1700, EUR/USD continues to trade in depreciated territory despite the much-welcomed recovery. This suggests continued upside risks, but we should also note that the average misvaluation over the past three months has been -1% in the pair – indicating a clear tendency to trade on the cheap side.”
“Today, we expect the euro to move due to external events, above all geopolitical news and to a lesser extent any fallout from the UK budget. While yesterday’s rise in the EUR/USD pair should not be seen as a direct impact of hopes for a peace agreement in Ukraine (but more technical, due to spreads), some optimism about the truce will likely facilitate the recovery of the single currency. A breakout in the coming days could support the pair to 1.1700, from one point of view. “We looked.”
