ECB Meeting Is The Only Interesting Event This Week

Welcome to a new trading week everyone.

It will be a notably quiet week in terms of economic data with the only key event being the European Central Bank policy decision on Thursday. ECB President Christine Lagarde said last Sunday that market participants should prepare for new guidance on stimulus but according to officials familiar with the matter, ECB policy makers are split over changes to their language on monetary stimulus.

It is clear that the implementation of the ECB’s new inflation strategy should confirm the central bank’s dovishness and that an exit from its accommodative policy is still very distant.  In short, the ECB is seen as one of the most dovish of the major central banks which should keep the euro under pressure. The question is however, how much of that dovishness has already been priced in to the euro’s exchange rate? For the EUR/USD to fall towards 1.17, the ECB will have to send a strong dovish message while convincing the market that the new strategy is a forceful change in guidance. We will know more on Thursday.


The pound found some support around 1.3750 amid hawkish comments from Bank of England members. While the possibility of a rate hike in the first half of 2022 could generally keep the pound supported, in short-term time frames, we now look at a break below 1.3730 which could lead to a test of 1.37/1.3690 and possibly even 1.3650. A current resistance is however seen at around 1.3870.

DAX: Breaking below 15400 could see a dip towards 15300 and possibly even 15100. On the upside, the 15800-border has so far proved a difficult hurdle for DAX bulls and we may have to wait some time before we see a sustained upside break.

We wish you good trades!

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