Euro to Weaken Against Pound and Dollar - BUT BEWARE of the Corrective Bounce in EUR/USD and EUR/GBP

However, we should be aware that the currency is capable of bouncing in the short term, a move that could catch many off guard.

The euro rate today: FX Markets at the weekend:

• The euro to dollar exchange rate (EUR/USD) is 0.08 pct lower at 1.3132.
• The euro to pound exchange rate (EUR/GBP) is at 0.7912.
• The euro to Australian dollar (EUR/AUD) is at 1.4077.
• The euro to Canadian dollar (EUR/CAD) is at 1.4300.

PS: All the above are spot market quotes, your bank will affix a discretionary spread to the figures. In order to get as close to the market rate we suggest consulting an independent FX provider, the delivery of up to 5% more currency is possible in many instances.

Euro Dollar Rate to Hit 1.3025 Warn Credit Suisse

The euro is ultimately stuck in a downtrend, as displayed by any longer-dated chart you choose to study.

However, be aware that a rally in the near term is possible.

In a comment to clients released by Credit Suisse we hear that 1.3025 remains a viable target:

"Although EUR/USD is still vulnerable to a corrective bounce, the broader trend stays lower to 1.3104, then 1.3020/15, notes Credit Suisse.

"EURUSD’s current decline is becoming stretched and near-term momentum is diverging, leaving prices vulnerable to a corrective bounce.

"However, the broader trend stays lower and we would view any strength as corrective and maintain downside targets next at the September low at 1.3104, followed by 1.3020/15 – the 50% retracement, 78.6% retracement of the 2013/2014 uptrend and measured target from the top. While we would expect stronger support here, a direct break below can see scope for 1.2994."

"Near-term resistance shows at 1.3220, through which should see a small base for a move back to 1.3261. Above 1.3298 is needed to ease to mark a more concerted correction."

Credit Suisse say they are maintaining a short EUR/USD strategy targeting 1.3025, with a stop at 1.3298.

Euro to Pound: Unable to Hold on Above 0.80

After failing to capitalise on strength above the 0.80 psychological mark the euro pound rate dropped back to the 0.7960-50 support area.

According to a recent analysis on the euro sterling by Admiral Markets, a break to 0.7890 is now possible:

"A sustained trade below 50-day SMA and subsequent weakness below 0.7950 level now seems to trigger fresh leg of downfall for the pair back towards 2014 daily closing lows support near 0.7890 region.

"On the upside, 0.8000 psychological mark remain a key level to be conquered decisively. Hence, a decisive back above 0.8000 mark now seems to trigger accelerated up-move towards 100-day SMA resistance near 0.8070-80 zone with 0.8030-40 area acting as intermediate resistance."

Take Advantage of the Bounce Say BNP Paribas

The EUR is going through a moderate corrective bounce as markets reassess their dovish ECB expectations for next week’s policy meeting, notes BNP Paribas in a client briefing released today.

Commenting on how upcoming market trade may play out, BNP say:

"Indeed, QE in September still seems very unlikely given that the ECB has only just announced that it retained a consultant for the ABS purchase program.

(Deutsche Bank are, on the other hand, predicting action to be taken).

BNP reckon there is probably greater scope for a rate cut instead (ahead of the first TLTRO auction) which would also send a strong signal that the ECB is prepared to respond strongly to the latest inflation readings.

Commenting further, the bank reckons:

"Against this backdrop we believe investors should position for further EUR weakness, using any bounces in the currency as a selling opportunity," BNPP advises."

In line with view, BNPP initiated yesterday a short EUR/CAD trade from 1.4380, targeting at 1.38 in addition to the existing EUR/GBP short.

"The trade expresses our bearish view on the EUR while also exploiting an opportunity to go against the market’s excessive bearishness on the CAD. The trade is off to a strong start after USDCAD fell through support around 1.0880," say BNP Paribas.