EUR tests resistance at 1.1125 – Scotiabank

Spot edged slightly higher on quiet trade in Asia and Europe, notes Shaun Osborne, chief FX strategist at Scotiabank.

The ECB emphasizes slow and measured tapering

“A number of ECB officials have spoken, and the messages are pretty clear – policymakers are in no rush to ease, and December is the next likely point at which rates will be cut. The outlook for slow and cautious tapering contrasts with market expectations for bolder and more aggressive Fed easing. EZ/US 2Y spreads narrowed to -135bp, the lowest since May of last year.”

“EUR/USD is on the brink of a bullish technical breakout. Spot has consolidated in a bearish range since late August – a potential bull flag pattern. Gains through the ceiling of the channel at 1.1125 – which is under pressure at the time of writing – should trigger a retest of 1.12 (at least) and should signal possibilities for a broader rally.”

“Momentum is tilting bullish and strengthening again, supporting the outlook for more gains in the euro. Major resistance is at 1.1275. Support is 1.1075.”