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FOREX: EURUSD Oscillating Around 1.0500 as ECB Approaches

FOREX
BulletMarketsForeign Exchange Bullets
  • Focus now turns to the ECB, with EURUSD continuing to oscillate around 1.0500, where notable levels of option expiries reside. Our baseline scenario assumes the ECB delivers a 25bp policy rate cut, staff macroeconomic projections show downward revisions to growth and inflation in 2025, while inflation converges to target over the medium term.
  • Overnight straddles suggest that EURUSD may be contained to a 65 point range either side of spot, limiting the probability of a significant breakout ahead of the weekend. With that in mind, initial resistance at 1.0566 (20-day EMA) remains intact and will garner attention on the topside, while support is at 1.0461, the Dec 2 low. A bearish trend structure is in place and 1.0335 remains the notable the bear trigger.
  • EURJPY has seen solid resistance ~160.50 over the past two sessions, unable to close above the 20-day EMA, intersecting today at 160.35. Further single currency weakness could also put further pressure on EURGBP, which continues to edge towards 0.8203, the Mar 7 2022 low and a major support for the cross. Any hawkish EUR reaction might see EURCHF revisit the post-SNB high of 0.9344, ahead of the 50-day EMA at 0.9353.
  • President Lagarde will likely indicate that risks to the outlook are tilted to the downside, but steer clear of providing any guidance on future policy rates and reiterate the data-dependent and meeting-by-meeting approach.
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  • Focus now turns to the ECB, with EURUSD continuing to oscillate around 1.0500, where notable levels of option expiries reside. Our baseline scenario assumes the ECB delivers a 25bp policy rate cut, staff macroeconomic projections show downward revisions to growth and inflation in 2025, while inflation converges to target over the medium term.
  • Overnight straddles suggest that EURUSD may be contained to a 65 point range either side of spot, limiting the probability of a significant breakout ahead of the weekend. With that in mind, initial resistance at 1.0566 (20-day EMA) remains intact and will garner attention on the topside, while support is at 1.0461, the Dec 2 low. A bearish trend structure is in place and 1.0335 remains the notable the bear trigger.
  • EURJPY has seen solid resistance ~160.50 over the past two sessions, unable to close above the 20-day EMA, intersecting today at 160.35. Further single currency weakness could also put further pressure on EURGBP, which continues to edge towards 0.8203, the Mar 7 2022 low and a major support for the cross. Any hawkish EUR reaction might see EURCHF revisit the post-SNB high of 0.9344, ahead of the 50-day EMA at 0.9353.
  • President Lagarde will likely indicate that risks to the outlook are tilted to the downside, but steer clear of providing any guidance on future policy rates and reiterate the data-dependent and meeting-by-meeting approach.