EUR/USD: Lagarde’s press conference eyed – OCBC

A 25bp cut is likely a done deal. OIS-implied has priced in back-to-back cuts for 1H next year, taking rates to below 2% in Jun 2025, or even 1.7% in July. The aggressive dovish pricing reflects a recession-driven rate cut cycle rather than a policy normalisation. Last at 1.0513 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Broader price pattern shows an inverted head & shoulders pattern

“Nevertheless, we would pay closer attention to Lagarde’s press conference for clues on how policymakers assess growth outlook to be. On German politics, Chancellor Scholz has called for a vote of confidence yesterday and the Bundestag will vote next Monday on 16 Dec. To survive the vote, Scholz would need to receive the support of an absolute majority of 367 votes. But in the event, he fails, then Germany is likely to make way for elections on 23 Feb 2025.”

“Far right AfD is calling for Germany to leave the European Union, the EUR and Paris climate deal as the party prepares for early elections in Feb-2025. The concern here is the explicit language to quit EU unlike its manifesto ahead of the European parliament elections previously in Jun-2024. Political risks in Europe, risk of dovish ECB and renewed weakness in RMB may continue to weigh on EUR, until we get some clarity. EUR fell, dragged by RMB’s decline yesterday.”  

“Daily momentum is mild bullish but RSI fell. Consolidation likely. Broader price pattern shows a classic formation of an inverted head & shoulders pattern, which is typically associated with a bullish reversal. Neckline comes in at 1.0610/20 levels. Decisive break out puts next resistance at 1.0670 (38.2% fibo), 1.0710 (50 DMA). Support at 1.0460 levels.