EUR/USD neutral following the ECB – UOB

FX Strategists at UOB Group assessed the recent price action around the pair in the wake of the dovish taper by the ECB on Thursday.

Key Quotes

“The ECB extended its asset purchase programme by 9 months, at a reduced monthly pace of EUR30bn (from EUR60bn). All other elements of policy communication were also relatively dovish”.

“Although Draghi was keen to stress that there would be no “sudden stop” to QE, we think there is a high likelihood that QE could end next September. However, we see no rate increases before mid-2019 at the earliest”.

“Investors have voted and sold the EUR/USD decisively after the perceived “dovish taper” by ECB. Over the past 24 hours, EUR/ USD has lost 2 big figures, collapsing from 1.1830 to 1.1630”.

“Yield spread has moved against the EUR/USD, net long positioning is still vulnerable to more liquidation, and technical indicators suggest potentially more downside”.

“Overall, we neutralize our previous positive EUR/USD view and forecast EUR/USD at 1.17 from 4Q17 through to 3Q18”.