Prejudice to sell rallies – OCBC

The Euro (EUR) has been somewhat resilient of late, despite weak prints on Eurozone PMIs as well as increased bets on ECB tapering in October. The pair was last at 1.1187 levels, note OCBC FX analysts Frances Cheung and Christopher Wong.

Double-top at 1.12 awaits you

“OIS shows 82% probability of a 25bp cut (vs. 46% probability 2 weeks ago). And the EUR’s relative resilience can be attributed to optimism about China’s recovery after policy makers unleashed a big package of support measures. This week the focus shifts to German CPI (Mon), Eurozone CPI estimate (Mar).”

“Weaker-than-expected prints should see a 25-basis-point cut at the October 17 meeting, more or less fully priced. This can weigh EUR. Elsewhere, there are plenty of ECB speeches this week (around 17 officials scheduled, with Lagarde tonight) – we’re watching for any change in tone on policy guidance.”

“Daily momentum does not show a clear bias while the RSI has moved lower. Risks remain tilted to the downside. A double-top pattern – usually associated with a bearish reversal – was observed. Resistance to 1.12 (double-top). Support at 1.11 (21 DMA), 1.1030.60 (50 DMA, 23.6% 2024 fibo retracement from low to high). Bias to sell rallies.”