EUR/USD: Is It Time To Buy The Dip?

EUR/USD has retreated from the highs, mostly on profit-taking from the big sell-off of the US dollar. It previously advanced thanks to Draghi’s unconvincing complaints about the exchange rate. What’s next? Here are three opinions:

Here is their view, courtesy of eFXnews:

EUR/USD: Markets Likely See A Scope For A Move Towards 1.25 – BTMU

BTMU FX Strategy Research notes that ECB’s changes to the inflation forecasts at its September meeting and the fact that President Draghi confirmed QE tapering plans were being compiled and would be divulged in October highlighted the extent of EUR appreciation needed to alter the path of monetary policy.

“We suspect the market may see scope for EUR/USD moving to 1.2500 before prospect of QE tapering plans being altered.

Increased speculation of the ECB being forced to alter policy normalisation plans will likely become a much greater influence on slowing the speed of EUR/USD gains above the 1.2000 level but will perhaps only become a powerful influence at levels over 1.2500 when another inflation downgrade by the ECB would be hard to avoid,” BTMU argues.

EUR/USD: A Soft Cap Ahead Of ECB October Meeting; Dips To Remain Shallow & S/T – Danske

Danske Bank Research comments on EUR/USD reaction to today’s ECB September policy statement.

“The FX market bought the pair on ECB’s more positive assessment of economic growth this year and the signals that an announcement on monetary policy awaits in October. However, at the press conference Draghi made an effort to cap a further rise in EUR/USD by stressing the negative impact on the medium-term outlook for inflation from the stronger euro.

Hence, while the price action today underscores our view that underlying euro momentum remains strong, the market will keep in mind that the ECB is unlikely to tolerate a further strong euro appreciation in the short term, which should put a soft cap on the pair ahead of the October meeting.