While traders saw a rebound in the GBP/USD on Wednesday, the EUR/USD has been treading water with prices ranging between 1.18 and 1.1750.
Today, however, could be different for euro traders as the European Central Bank will outline how their new inflation strategy affects their guidance for future monetary policy. After having agreed on a higher inflation goal, ECB policy makers will have to adapt their language on interest rates and asset purchases. Today’s discussion will thus pave the way for the possibility of taper talks in September. ECB officials repeatedly cautioned against withdrawing emergency stimulus too soon, which is why chances still remain in favor of the doves and thus in favor of a normally weaker euro. However, much of that dovishness is already priced in and market participants do not appear to be expecting many fireworks. The impact on the EUR/USD will however hinge on the ECB’s communication changes.
The ECB decision is scheduled for 11:45 UTC, followed by a virtual media briefing from President Christine Lagarde 45 minutes later.
Technically and looking at larger time frames the pair appears to be oversold while bearish momentum faded around the 1.17-support and stochastics confirm an oversold situation. In short, this picture could predict an upcoming upward movement towards 1.19 and 1.20, provided that crucial support zone at 1.17 and 1.16 remain unbreached.
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