By Lukman Otunuga Senior Research Analyst, ForexTime
All eyes will be on the European Central Bank (ECB) meeting on Thursday.
The ECB is widely expected to leave monetary policy unchanged. However, it may be unwise to label this event as a snoozer given how this will be their first meeting since the conclusion of the strategy review.
Before we take a deep dive into what to expect on Thursday, it is worth keeping in mind that the euro has appreciated against most G10 currencies this month, excluding the dollar, yen and swiss franc.
Interestingly, the EURUSD is trading below the 1.1800 level as of writing with the path of least resistance pointing south as the dollar appreciates. How the currency pair concludes this week is likely to be influenced by what happens during the ECB meeting.
Free Reports:
Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.
Download Our Metatrader 4 Indicators – Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter
There are some of key things to look out for during Thursday’s policy meeting.
- 1) With the new inflation target of 2% established (up from “below, but close to 2%) and the ECB allowing inflation to overshoot the target, investors will be looking for any change in central bank’s forward guidance. A potentially more dovish shift in the policy stance is likely to inspire euro bears.
- 2) It will be interesting to see whether the ECB addresses what happens to the mammoth 1.85 trillion-euro Pandemic Emergency Purchase Programme (PEPP) which expires in March 2022. As of now, PEPP is not due to be reviewed until September when the latest staff forecasts are released.
- 3) Given how inflation remains a hot topic across the board, market players may be watching to see whether the ECB says anything about the latest CPI figures. Eurozone inflation cooled in June to 1.9% from 2.0% in May.
- 4) If there is any mention of the Covid-19 menace and risks it presents to the Eurozone economy. According to a Reuters tally, Europe has become the first region worldwide to cross 50 million coronavirus cases. As the more contagious Delta variant spreads its poisonous tentacles across the region, this may fuel concerns over the continent’s economic recovery.
- 5) Let’s not forget about ECB President Christine Lagarde’s press conference. Lagarde expects the PEPP to continue to at least March 2022 but it may be followed by a ‘transition into a new format’. If she adopts a dovish and cautious tone on Thursday, this may result in a weaker euro. While the ECB is unlikely to sound hawkish, any surprises could send the euro charging higher.
Redirecting our attention back towards the technicals, the EURUSD remains under pressure on the daily charts. There have been consistently lower lows and lower highs while the MACD trades below zero. Sustained weakness below the 1.1800 level could signal a decline towards 1.1704. Should bears break through 1.1704, the next key point of interest can be found at 1.1620 – a level that has not been seen since November 2020.
Alternatively, a strong move back above 1.1800 could trigger an incline towards 1.1860 and 1.1900, respectively.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
Article by ForexTime
ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com
- AI Revolution and NVDA: Why Tough Going May Be Ahead Mar 28, 2024
- GBP Consolidates Amid Concerns Over Economic Growth and Wage Trends Mar 28, 2024
- The Australian and German indexes set all-time highs. The Reserve Bank of South Africa kept the rate at 8.25% Mar 28, 2024
- Target Thursdays: EURGBP, GBPUSD & Crude hit targets! Mar 28, 2024
- EURSEK: Hits fresh 2024 high at 200-day SMA Mar 27, 2024
- Australia has seen a decline in inflationary pressures. Japan may conduct currency intervention shortly Mar 27, 2024
- Australian Dollar Slides to Three-Week Low Mar 27, 2024
- Trade restrictions between the US and China are intensifying. Japan’s currency diplomats talk about possible intervention to support the yen Mar 26, 2024
- Japanese Yen Awaits Intervention Amid Weakness Mar 26, 2024
- NETH25 index chasing new record highs! Mar 26, 2024