Key Moments
- Commerzbank’s Antje Praefcke expects EUR/USD to trade sideways amid elevated uncertainty.
- Geopolitical tensions in the Middle East and unclear Federal Reserve leadership are cited as key drivers.
- Praefcke perceives a modest bias in favor of a stronger US Dollar in the near term.
Sideways Trading Expected in EUR/USD
Commerzbank strategist Antje Praefcke anticipates that EUR/USD will continue to move within a limited range, as market participants confront several unresolved risks that prevent a strong directional trend in the US Dollar.
According to Praefcke, the combination of the ongoing war in the Middle East, uncertainty surrounding the future Federal Reserve Chair and policy stance, and the possibility of delays in the confirmation of Warsh all contribute to a lack of conviction among investors.
Against this backdrop, she expects only modest moves and maintains that the balance of risks points slightly toward further US Dollar strength in the coming days.
Key Risk Factors and Market Positioning
Praefcke notes that the market is struggling to identify a clear catalyst that would justify a pronounced move in the Dollar either higher or lower, leaving EUR/USD prone to sideways price action.
| Factor | Impact on Market Sentiment |
|---|---|
| Middle East war | Raises uncertainty, supports cautious positioning in FX markets |
| Unclear Fed Chair and policy outlook | Limits confidence in a clear Dollar direction |
| Possible delays to Warsh’s confirmation | Adds to policy and leadership ambiguity |
She underscores that the absence of clear developments on these fronts is encouraging a “wait-and-see” posture among traders, with EUR/USD remaining confined to a relatively narrow band.
Analyst Commentary
Praefcke emphasizes the dominance of uncertainty in current FX conditions:
“At the moment, there are simply too many unanswered questions to provide a compelling reason to push the dollar significantly in one direction or the other. I fear this will remain the case in the coming days, with sideways trading prevailing in EUR/USD.”
On the interaction between the Middle East conflict and Dollar dynamics, she adds:
“Since there are no signs of a renewed escalation that could drive the dollar much higher, but also no foreseeable end to the conflict – which in turn could lead to dollar selling – a “wait-and-see” approach makes sense for the market.”
Summarizing her tactical stance, Praefcke states:
“Given all these uncertainties and unanswered questions, the safest option for now is to trade sideways and wait for the next developments. I see a slight bias toward a stronger US dollar as long as no new talks between the US and Iran are scheduled, since uncertainty surrounding the Middle East conflict has increased somewhat again.”
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