A recovery attempt in EUR/USD on Tuesday was quickly met with sellers on an approach to 1.1120 and the pair has since given back gains and posted a fresh three-week low. Volatility stands to slow in the session ahead as there are no high impacting economic reports scheduled for release.
The ECB is not expected to act on Thursday although Bloomberg reported that 90% of analysts expect a change to the inflation strategy. It would be the first change in 17 years if President Lagarde decides to make the change.
The change to the approach in inflation is expected as the ECB continues to run below their inflation targets despite aggressive and unconventional easing since mid-2014.
EUR/USD has been lingering near a notable support confluence and a range might develop ahead of the ECB meeting as traders await the outcome of it before putting on positions.
The dollar continues to show strength as the trade-weighted index (DXY) rallied to a fresh three-week high on Monday. However, the strength has not been broad-based this week and resistance that held DXY lower in late December seems to be deterring buyers at this stage. At least, over the near-term.
Yesterday’s price action shows that sellers are quick to jump in on rallies but at the same time, declines below 1.1090 have fizzled out quickly over the last few weeks.
A major support confluence is in play for EUR/USD as the pair trades near a rising trendline. The trendline originates from the October low and falls near a horizontal level at 1.1072.
In a similar fashion, the dollar index faces notable resistance between 97.68-97.78. This is an important technical area of the index. It not only held it lower in late December but also on several attempts between November 2018 and March 2019.
Among the cross rates, EUR/CHF is seeing strong upward momentum in the early day. The pair is up nearly half a percent and has wiped out losses from the prior five sessions.
- Sellers continue to show their presence on small rallies in EUR/USD
- At the same time, downside momentum has faded below 1.1090 on several attempts over the past few weeks.
- Volatility is likely to remain subdued ahead of Thursday’s ECB meeting.
This article was originally posted on FX Empire
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