The EUR/USD pair has retraced part of yesterday’s post-ECB gains in broadly dollar-positive price action. Economists at Scotiabank expect the world’s most popular currency pair to tick down and slide below the 1.16 level.

Break above 1.17 is key to see further EUR gains

“We maintain a bearish view on the currency after yesterday’s ECB announcement. Lagarde did not push back on market rate hike expectations as the outlook on inflation remains highly uncertain – and a strong rebuke of market pricing could ‘backfire’. 

“Month-end trading and short-covering likely also conspired to the spike in the EUR and we expect pressure for a firm drop under 1.16 to continue.”

“1.17 remains a key level to breach (50-day MA at 1.1699) against downtrend resistance from late-May/early-June (the level is also the 23.6% Fibo retracement of the May-Oct move). Beyond 1.17, 1.1750 stands as resistance while support is 1.1620 and the 1.1600 zone; 1.1572 follows.”