FXstreet.com (Barcelona) - ECB's rate cut did increase lower pressure over the Euro and the European currency explored briefly the area below 1.2500, although the pair has posted a strong upward reversal and is trading above 1.2700 at the opening times of the European trading session.

Kasper Kirkegaard points out the contradiction of the Euro recovery with stock markets plummeting: The euro came under heavy pressure yesterday, following ECB's 50bp rate cut, and EUR/USD dropped temporarily below 1.25. Interestingly, the pair stabilized in the late US session, despite plummeting equity markets, which proves how difficult it is currently to break the approximate 1.25-1.30 range.

In regards to the long-term outlook, Kirkegaard expects the Euro to break well lower than 1.2500 in coming months: We still look for EUR/USD to break meaningfully below 1.25 in the coming months, though, as the ECB will lower rates further and as CEE uncertainty remains high. If non-farm payrolls surprise negatively today we would continue to look for the inverse reaction on FX market - i.e. for EUR/USD to move lower on negative US data surprises.