EUR/USD attention is now on 1.1740 – Danske Bank

In opinion of Christin Tuxen, Chief Analyst at Danske Bank, the pair’s downside should find decent contention in the 1.1740 area.

Key Quotes

“EUR/USD broke below 1.18 on what appears to be primarily a continued repricing of a political risk premium in the euro following the muddy outcome of the German election”.

“Yellen’s speech yesterday did help to stem the drop in EUR/USD somewhat: even if she reiterated the case for a hike near term, her ‘open-mindedness’ regarding policy countered any USD-positive effects”.

“Albeit speculative EUR/USD longs have been reduced somewhat in recent weeks, the cross remains vulnerable to negative news but we still see 1.1740 as a key level of support. Indeed, taken together, the batch of ECB speakers in the week so far have in our view served to underline that it remains the pace of effective euro appreciation rather than the outright level of EUR/USD that the ECB would react to – and at this stage, we would not expect the ECB to make much of an effort to weaken the single currency”.

“Note that ECB’s Draghi and BoE’s Carney are due to have a ‘dialogue’ (aka panel discussion) at a BoE conference on Friday afternoon – this could prove interesting both for EUR and GBP crosses as markets are currently sensing that either of the two may be at the verge of possibly setting a new course of direction for monetary policy, i.e. heading for ‘normalisation’