ING’s Chris Turner notes that EUR/USD has found support near 1.1390/1.1400 after a sharp 3% decline, but elevated Oil prices and heavy net Euro longs still pose downside risks. While he expects EUR/USD to move higher over coming months once Oil flows normalize, he warns another energy spike could push the pair toward the 1.12/1.13 area.

Euro steadies on key technical level

"The latest positioning data from the CFTC in Chicago shows that investors continue to pare back euro net long positions. Yet looking at the asset manager community, positioning remains heavily net long euro and there are more adjustments to be made should conditions dictate."

"Thursday's European Central Bank meeting could also prove mildly hawkish. But the difference to the Fed is that the market already prices close to 50bp of ECB rate hikes this year."

"In turn, the bar is high for the ECB to move short-dated euro interest rates and the euro higher."

"EUR/USD has found support at last summer's low near 1.1390/1400. Some consolidation may be due after a quick 3% drop over the last fortnight."

"We do think that EUR/USD will start to move higher over coming months once oil supplies start to flow again. But that still seems a distant prospect today and another leg higher in energy could see EUR/USD still extend to the 1.12/13 area given the overhang of net euro long positioning."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)