Forex: EUR/USD boosting up ahead of bond auctions

Growing risk sentiment ahead of the ECB is making its impact on the FX market, contributing to a new wave of bids on the EUR/USD, now up to 1.3037. Above is Thursday's close of 1.3048, then the weekly high of 1.3076 before heading towards the 1.3100 psychological level.

Investors are keeping an eye at the French (€6.5-7.5bn) and Spanish (€4-5bn) bond auctions, but the ECB is the main focus. “We think that the ECB has seen enough to increase its dovishness, but not enough to cut yet (although we do put odds of a refi rate cut at 30-40%, which is more than is priced into the market)”, wrote TD Securities analysts, seeing downgrades to growth both this year and next and inflation this year could be flat or slightly lower. “And while we’ve seen disappointing survey data over the last month, that won’t be enough to dissuade the optimists from the story of improvement, and the recent depreciation of EUR will leave the currency as a less pressing concern”, they added.

UBS analysts are bearish: “As the pair closed below the support at 1.2997, this is a major bearish development, paving the way for weakness to 1.2877”, wrote analyst Gareth Berry, pointing to resistance at 1.3080.