EUR: Downside risks for EUR/USD – ING

The European data calendar is quiet this week, and investors await the main event of the week – Thursday’s ECB decision. This month EUR/USD is staying offered despite a strong seasonal bullish tendency, ING’s FX analyst Chris Turner notes.

January and February may become bearish for EUR/USD

“Market pricing has settled on a 25bp ECB rate cut – with which we agree – although a dovish press conference from President Lagarde could keep the euro offered. Certainly, rate differentials remain very wide in favour of the dollar, although it will probably now require a hawkish repricing of the Fed curve to drive this differential wider from current levels.”

“For EUR/USD today, the focus will largely be on the US CPI reading and perhaps, too, on the Bank of Canada decision. Technical indicators suggest EUR/USD is now ready to restart its bear trend should macro and geopolitical inputs allow. For that reason, we have a preference that 1.0550/70 may be the best EUR/USD level of the day and look for catalysts to take it down to the 1.0450 area.” 

“This month EUR/USD is staying offered despite a strong seasonal bullish tendency. Typically January and February prove bearish months for EUR/USD. We suspect corporate America would be very grateful for any EUR/USD bounce into which they would offload the euro.”