EUR/USD capped at $1.3800
EUR/USD has recovered some ground on Monday, bouncing from the 55-day MA at $1.3710 towards the $1.3800 figure. However, analysts of the major investment banks are cautious about the euro ahead of the ECB policy meeting on Thursday. The regulator is expected to pull the currency down by an additional easing or at least by a more aggressive verbal intervention.
Credit Agricole holds a medium-term EUR/USD short from $1.3780 with a target of $1.3300 and a stop at $1.4160. Economists believe the most effective measure the ECB can undertake is to introduce the negative deposit rate: “As the EUR has been benefitting from a positive capital flow situation, cutting the deposit rate negative appears to be the most efficient way going forward. Indeed, Weidmann said too that negative rates would be more appropriate to curb the EUR”, they explain.
Credit Suisse recommends selling EUR/USD on rallies from the rising 55-day MA ($1.3712). Strategists went short on the pair from $1.3795 targeting $1.3665. “We favor a break below $1.3704 for a test of $1.3664/43 – the 61.8% retracement of the February/March rally, late February low and trend line support”, analysts add.
Chart. H4 EUR/USD