- Euro has suffered since ECB event

- Negative ECB narrative now run dry

- Break above 1.2450 is a signal to bet on a rise again

© PGAs of Europe, Flickr

The ECB can't really say anything further that will disappoint the Euro say Italian bank UniCredit suggesting the time to buy EUR/USD will ultimately present itself once more we are told.

The Euro fell in the wake of the European Central Bank's policy event held on Thursday, March 09 after policy makers confirmed a lack of urgency on exiting the asset purchase programme.

The broader Euro exchange rate complex came under pressure with EUR/USD depreciating by 0.8% on the day.

However, the losses have not extended into any additional sustainable Euro weakness and there is the sense that, while still vulnerable, the worst might have passed.

In this respect, currency strategists at UniCredit Bank believe "there is only very narrow space for another Euro sell off" as there is "limited scope for the ECB to surprise on the dovish side now".

The view is shared by other analysts who believe the Euro-to-Dollar exchange rate is in the process of falling back to the bottom of its two-month trading range over coming days. Most believe the range will ultimately hold.

UniCredit say recent EUR/USD stability - a spot range of abound 170 pips in the last two weeks, with implied volatilities falling across the curve - "reflects broader Dollar stability".

"Hence, we keep our bullish Euro stance," says Dr. Vasileios Gkionakis at UniCredit Bank in London.

But, in the near-term, UniCredit say the currency would need positive impulses, either from the ECB or from a resumption in widespread USD weakness (or both).

Gkionakis suggests a positive impulse from the ECB is unlikely to come soon while the short-term outlook of the Dollar is uncertain, "although the fundamental case for more and lasting greenback depreciation remains in place."

"Stay on the sidelines on EUR/USD for now and rebuild longs once we break out of the recent range, i.e. above 1.2450," says Gkionakis.

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