Dovish-leaning ECB should help halt euro rally – Scotiabank

The euro (EUR) climbed to near 1.10 this morning despite signs that even the relative hawks on the ECB’s governing board may not oppose a rate cut later this month, notes Shaun Osborne, Scotiabank’s Chief FX Strategist.

EUR to retest 1.10 breakout point

“While ECB Governor Holzmann commented yesterday that the fight against inflation is not over, Nagel said earlier today that he was open to discussing a rate cut this month. Swaps are pricing in 24 basis points of risk reduction for the 17th. A dovish ECB should help stop the euro’s rally around the 1.10 area.”

“Spot is back to retest last week’s technical breakdown at 1.10 – the lowest of the August and September tests of 1.12 and effectively double the trigger point. This should be firm resistance if the pattern is to achieve its technical – measured – promise of driving EUR/USD back to the 1.08 low over the next few weeks.”