UBS Re-Initiates Long EUR/USD Trade, Citing Central Bank Policy Divergence

Strategists at UBS are advising clients to go long on the euro against the U.S. dollar, re-initiating a trade idea centered on divergent central bank policies. The bank recommends entering the trade at the current level of approximately 1.1475.

Trade Parameters

In a note to clients, UBS outlined a new long position on the EUR/USD pair with parameters that mirror its initial recommendation from mid-July. The bank did not disclose the specific date the previous position was closed.

• Entry Point: ~1.1475
• Price Target: 1.17
• Stop-Loss: 1.13

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Context and Rationale

This recommendation comes after a previous, similar trade was closed. UBS had initially proposed a long EUR/USD position in mid-July with the same 1.17 target and 1.13 stop-loss. After the exchange rate reached its target, the bank adjusted the position by raising the target to 1.20 and moving the stop-loss up to 1.15.

That revised position was stopped out this week when the EUR/USD pair hit the 1.15 level. Despite the recent closure, UBS stated that it finds the currency pair's current price attractive again. The core logic for re-entering the trade remains the perceived divergence in monetary policy between the European Central Bank and the U.S. Federal Reserve, which the bank sees as a key driver for euro strength.