EUR/USD appears to be bottoming out – Danske Bank

Deeper retracements in spot appear somewhat limited, according to Kristoffer Lomholt, Senior Analyst at Danske Bank.

Key Quotes

“After a continued slide in EUR/USD on Monday on what seemed like eurozone politics and the prospect of a more hawkish Fed Chair with Kevin Warsh coming into play, the cross saw a relatively muted reaction to the strong US ISM manufacturing yesterday as speculation the rise might be driven by hurricanes dampened a further re-pricing of Fed hikes (December still priced with around 70% probability)”.

“Should Catalonia declare independence it should only weigh temporarily on the cross but in order to take EUR/USD substantially below 1.17 near term (technicals suggest support at 1.1689) it is likely to require a next leg of Fed repricing”.

“Janet Yellen speaking and the ECB minutes due tomorrow are unlikely to rock the boat much given that we have already had a wealth of commentary from both central banks recently. We expect EUR/USD to settle around current levels near term in a first sign the pair is starting to bottom out”.