EUR/USD is drifting a little lower in quiet trade at the start of the week, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

ECB rate cut fully priced for Thursday

“There were no major data reports in the Eurozone this morning and EUR drift likely reflects a continuation of the USD correction seen as the dust settled around Friday US data.”

“Steady—so far—short-term EZ/US spreads (the 2Y gap is little changed around – 142bps this morning) suggest the EUR should remain supported on minor dips. A 25bps cut at Thursday’s ECB policy decision is fully priced in. Cautious guidance on the outlook might be modestly EUR-supportive.”

“A soft close Friday for the EUR leaves the daily chart tilting clearly negative via a bearish outside range session. Underlying trend signals remain bullish across the daily and weekly charts, however, which should help limit EUR losses in the short run at least. Weakness through last week’s low at 1.1025 may see a bit more drift to the mid/upper 1.09s. Resistance is 1.1075/85.”