EUR hits fresh one month high ahead of ECB Thursday - Scotiabank

Euro (EUR) is soft, down 0.3% against the US Dollar (USD) and a mid-performer among the G10 currencies, pulling back modestly from its overnight push to a fresh one month high, Scotiabank's Chief FX Strategist Shaun Osborne notes.

CPI disappoints the markets

"The preliminary euro area CPI data for May have offered little in terms of support, with both headline and core delivering a slight disappointment to 1.9% y/y and 2.3% y/y, respectively (vs. expectations of 2.0% and 2.4%, respectively)."

"From a slightly longer-term perspective, EUR/USD's recent recovery has been fundamentally driven, with a notable turn in spreads over the past week or so. ECB rate expectations have generally stabilized, and markets have pared back their expectations for easing. The risk for Thursday's ECB meeting is a neutral or hawkish cut, given the ECB's unequivocally dovish messaging into a widely anticipated and fully priced 25bpt cut."

"EUR/USD remains well supported with a push to fresh local highs in the mid-1.14s. The RSI is modestly bullish at 58 and remains well short of the overbought threshold at 70. The 50 day MA (1.1221) remains an important level of recent support and the multi-month trend remains bullish with a clear sequence of higher lows and higher highs. Near-term support is expected at 1.1350 and near-term resistance is limited ahead of the upper 1.15 area."