EURUSD waits on ECB meeting

• EURUSD in bearish flag pattern

• ECB meeting looms large

• Prices wedged between 21 & 50 EMA

• Significant move could be on horizon

• Selloff expected if bearish flag breaks

The past few days have been a choppy affair for the EURUSD.

Prices remain trapped within a range on the daily charts as bulls and bears wait for a fresh fundamental spark.

This could come in the form of the European Central Bank (ECB) meeting on Thursday. Although the central bank is widely expected to leave rates unchanged, much focus will be on President Christine Lagarde’s press conference for fresh clues on the outlook for rate cuts. It is worth keeping in mind that it was only last week Lagarde said that the ECB is likely to cut rates in Summer. Should she reiterate this message and push back on rate-cut bets, euro bears could enter the building.

Traders are currently pricing in a 64% probability of a 25-basis point ECB cut by April, with a cut by June fully priced in.

Beyond the ECB meeting, it will be wise to keep an eye on key US economic data which could also influence the currency pair.

Focusing on the technical picture, the EURUSD could be gearing up for a significant move.

A bearish flag pattern can be observed on the daily timeframe.

Note: A bearish flag is a short-term bearish continuation pattern.

A proper flag should have a flagpole (where price nearly goes vertical), leading to price action bounded by two parallel lines, and often tilting against the existing trend.

With the flagpole often used as an estimated target after a breakout out from the flag, this current flag has a target of about 138 pips.

The location of this flag however may point towards a potential failed flag/ “false flag”.

The flag sits right on the upward-sloping trend line (a demand zone where bulls look to initiate new buys) drawn from October 3rd, 2023, and has been tested a few times after.

A close above the flag’s resistance may encourage bulls (those looking to see this pair rally) to push EURUSD higher.

As bulls join the rally in fiber to a possible new high above the December 28th high at 1.11396, attention should be given to the following potential resistance levels

1.09214: The 21-day exponential moving average

1.09321: The 50 Fibonacci retracement level

1.09813: The 38.2 Fibonacci retracement level level

1.10421: The 23.6 Fibonacci retracement level.

However, if the bearish flag breaks, below the support zone of the flag, its target objective maybe 1.04659  which is the 100.0 Fibonacci level