Jens Pedersen, Senior Analyst at Danske Bank, argued that a top could possible be in place in the pair after the recent rejection from levels near 1.1500.
“In FX markets the main movement in the first two days of the week has been the drop in EUR/USD”.
“First, Monday’s release of a San Francisco Fed paper eased some of the US growth concern that has dominated market sentiment recently. The paper claimed that if an additional seasonal adjustment was made to the disappointing US Q1 growth figures, actual GDP growth was annualised 1.8% q/q instead of 0.2%”.
“Second and most importantly, Benoit Coeure’s comment yesterday that the ECB intends to frontload asset purchases in May/June ahead of the poor liquidity summer season sent EUR/USD significantly lower”.
“While there are no changes to the overall QE programme, the timing is important given the significant sell-off in Bunds and the spill-over to EUR/USD. Coupled with the lingering Greek worries we believe this has taken the top-side risk in EUR/USD”.