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Currency Analyst since 2010

EUR/USD into the ECB

EUR/USD failed to close above 1.1000 on Tuesday, although the US dollar was weakened by lower core CPI. According to CME, the odds that the Fed will raise interest rate in December declined from 64% to 60%.    

Tomorrow’s meeting of the European Central Bank will be in the center of the market’s attention after the recent speculation that the ECB may start tapering its quantitative easing program. The event should cause a spike in volatility. The ECB president Mario Draghi will have to comment on these tapering rumors. In addition, traders will be looking for signs that the ECB will extend QE program beyond March 2017. The prevailing opinion of the economists is that the regulator will announce QE extension this year.

EUR/USD is trading below the weekly pivot level of 1.1047 and should remain below this point as the market is waiting for the outcome of the ECB meeting. Taking into account the fact that last week it breached 2 important support lines – support from the end of 2015 and 2016 support – the risks for the euro have shifted to the bearish side. If the ECB hints on additional easing, we’ll see another selloff of the single currency. The target is 1.0950/11 area (important support of June/July lows, 61.8% Fibo of 2015-2016 increase) ahead of 1.0890 (first weekly pivot support). Note that the euro’s decline on the ECB may be short-lived as the regulator’s loose monetary policy is largely priced in. On the upside, above 1.1047 further resistance lies at 1.1060 and 1.1100/20.

Other important events for EUR/USD include the third and the last presidential debate between Hillary Clinton and Donald Trump. There will be also comments from the Federal Reserve members Williams and Kaplan, who don’t vote this year, and Dudley, who is a voter, though his speech will likely be not about the monetary policy.     

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