EUR/USD is being weighed on by benign economic data, geopolitical risk and its general use as a funding currency. Analysts are quite split this week on what Thursday’s ECB meeting will deliver. Some are tipping an ECB rate cut and others are eyeing a stimulus package, while the rest aren’t expecting action just yet.
However, if we don’t get action or an indication that action is imminent, this could be a game changer as far as price action is concerned. With EUR/USD trading at a fresh cycle low on Friday and fast heading towards September 2013 lows, there is a risk we’ll see those lows tested in the near term.
The pair is already looking quite vulnerable in Asian trade. With German GDP, Spanish manufacturing PMI, Italian manufacturing PMI and the region’s PMI due out, there is room for some volatility. Given the fact the pair is in oversold territory at the moment, a test of 1.3100 could encourage some short-term support.