By Areena FxIt could have been worse for EUR/USD. Consensus and ING’s view for a rally in EUR/USD towards 1.20 into year-end largely depends on a dovish Fed. It is not as though we are particularly bullish on the euro. Last night’s Fed meeting therefore makes that 1.20 year-end call a little harder to achieve. That said, EUR/USD found some support below 1.1600 overnight, which suggests investors are much better balanced in terms of dollar positioning than they were back in April, ING’s FX analyst Chris Turner notes.
EUR/USD looks more vulnerable to 1.1550 now
“Where does EUR/USD go from here? Today, we’ll see third-quarter GDP data from the eurozone. Remember that survey data has been encouraging, but the hard data has so far been poor this summer. Welcome news has already been seen this morning with French third-quarter GDP coming in at 0.5% quarter-on-quarter versus 0.2% as expected. But unless we get a big upside surprise to eurozone GDP – expected at 0.1% QoQ – it is hard to see EUR/USD getting much of a lift.”
“We also have the small matter of today’s European Central Bank meeting. However, we doubt President Christine Lagarde will feel the need to rock the boat of market pricing, which very marginally favours another cut sometime over the next nine months.”
“1.1640/50 looks to be the top of the short-term range, and EUR/USD looks more vulnerable to 1.1550 now, given last night’s communication from the Fed. Downside risks could also emerge from any flash October CPI releases from Germany, Spain and Belgium today.”