The Euro’s (EUR) grind higher has extended above 1.03, barely, in quiet trade, Scotiabank's Chief FX Strategist Shaun Osborne notes.

EUR grinds higher

"Caution on the ECB policy outlook has helped narrow EZ/US short-term spreads—the 2Y bond spread has compressed more than 25bps over the past month or so. But ECB policy doves continue to press their views that rates are poised to fall relatively quickly (Villeroy said earlier that it made sense to cut rates to 2% by mid-year). That prospect may limit the EUR’s ability to recover in the near-term."

"Yesterday’s rise in the EUR followed a bullish “hammer” signal Monday and the combination of price action over the past three trading sessions has developed a compelling “morning star” reversal pattern on the daily candle chart."

"There is a fair amount of congestion on the charts in the low/mid 1.03 zone, however, so progress may be slow. EUR gains should pick up a little more above 1.0365. Support is 1.0250/60."