I can see the argument for a euro rally on an ECB rate cut but I don’t believe it.
When rates were lowered to 1.25% from 1.50% on Nov 3, EUR/USD fell 150 pips then recovered after Europe closed. The rebound was a headfake, however, as EUR/USD would go on to tumble 1200 pips through the end of the year.
On December 8, when rates were lowered to 1.00%, the euro fell 120 pips after the decision and continued to fall until the first LTRO in mid-January.
In both instances the market was volatile and choppy, so set your stops wide.
The only instance I can see the euro rallying alongside a rate cut is if other extraordinary measures are introduced, such as bond buying or another LTRO. Either of these outcomes could spark a swift short-covering rally that might not stop until 1.30.
