The EUR/USD currency pair has experienced a decline in the American session on Friday, falling below 1.0900. This drop in value can be attributed to quarter-end flows that are allowing the US Dollar to find some demand. However, the risk-positive market environment is limiting the pair’s downside ahead of the weekend.
Quarter-End Flows Allow for US Dollar Demand
Quarter-end flows refer to the rebalancing of investment portfolios that occurs at the end of each quarter. This rebalancing involves selling certain assets and buying others in order to maintain a balanced portfolio. During this process, there is typically an increase in demand for the US Dollar as investors sell off other currencies and buy USD.
Risk-Positive Market Environment Limits EUR/USD Downside
Despite the increase in demand for the US Dollar due to quarter-end flows, the EUR/USD pair has not experienced a significant drop in value. This is due to the current risk-positive market environment, where investors are willing to take on more risk in exchange for potentially higher returns.
The recent decline of the EUR/USD pair below 1.0900 can be seen as a result of these conflicting factors. While quarter-end flows are allowing for increased demand for the US Dollar, the risk-positive market environment is limiting the downside for the EUR/USD pair.
Outlook for EUR/USD Pair
Looking ahead, the EUR/USD pair is likely to continue to be influenced by quarter-end flows and the risk-positive market environment. However, there are other factors to consider, such as economic data releases and geopolitical events.
In the short-term, the EUR/USD pair may continue to be range-bound, with the 1.0900 level acting as a key support level. If this level is breached, the pair could experience further downside, with the next key support level being 1.0850.
In the longer-term, the outlook for the EUR/USD pair is more uncertain. There are several factors that could impact the pair’s value, including the ongoing COVID-19 pandemic, geopolitical tensions, and the possibility of further stimulus measures from central banks.
Conclusion
Overall, the recent decline of the EUR/USD pair below 1.0900 can be attributed to quarter-end flows allowing for increased demand for the US Dollar. However, the risk-positive market environment is limiting the downside for the pair ahead of the weekend. While the short-term outlook for the pair is uncertain, there are several factors that could impact its value in the longer-term.
