ING's FX team says EUR/USD's bounce from April lows runs into seller resistance near 1.15 on rising TTF gas costs and the ECB-Fed rate divergence.
Alpha Score of 75 reflects strong overall profile with strong momentum, strong value, strong quality. Based on 3 of 4 signals — score is capped at 90 until remaining data ingests.
EUR/USD traded near 1.16 Thursday after bouncing from its April trough. ING's FX strategy team expects the rally to meet seller resistance near 1.15.
Pesole called the recovery fragile. Renewed energy-price pressure from higher natural gas storage costs and a widening EUR-USD rate spread will cap gains around 1.15, he wrote in a note.
The pair rose about 1.5% from its April low after a softer US CPI print narrowed the policy gap. ING sees the narrowing as temporary. The ECB is expected to cut rates again in June. The Fed is expected to hold. ING said the two-year swap differential pushes back toward 150 basis points in favor of the dollar.
Natural gas futures for Dutch TTF delivery climbed 8% this week. Lower storage injections and unplanned Norwegian maintenance added to the euro area's import bill. ING estimates each 10% rise in TTF adds roughly 0.3 percentage points to euro-area headline inflation. The same rise subtracts from growth, the bank said. The combination of higher inflation and slower growth historically weighs on the currency.
Positioning data from the CFTC shows speculative shorts on the euro still outnumber longs by about 2:1. Pesole said the recovery was driven by short-covering, not fresh bullish conviction. A break above 1.1650 would require a sustained shift in the rate path or a sharp drop in gas prices. ING expects neither in the near term.
ING's 1.15 sell zone aligns with the 200-day moving average. That level capped rallies in three of the past four months. A close above that mark would open the door to 1.1720, the firm's year-end target. The base case is for the euro to grind back toward 1.12 by September.
The ECB meets June 6. The Fed's next rate decision is June 12.
ING (ING GROEP NV) carries an Alpha Score of 75, classified as Strong, in the Financial Services sector.
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