FX Strategists at Scotiabank remain neutral/bearish on the pair in the near term horizon.
“Hawkish ECB comments coincided with the FOMC policy statement yesterday, possibly amplifying the reaction in EURUSD. ECB’s Nowotny said that Eurozone growth had improved and while inflation was lagging, policy makers “must” reconsider policy settings with deflation risks gone”.
“ECB messaging is prepping markets for tapering of QE which, we expect to occur after the summer. EUR gains are pronounced versus the CHF, with the cross rising more than 2% since Tuesday in an unusually swift move. The cross has risen to the highest since the SNB pulled away from supporting the 1.20 floor as markets price in more ECB risk”.
“Spot gapped higher above 1.1710 yesterday but subsequent price action suggest the market may roll over somewhat and weaken today. Intraday price signals are leaning bearish (“shooting star” signal on the 6-hour chart) and pressure on the low 1.17 area early in our session suggests risk towards the low/mid 1.16s”.