EUR/USD closed with a large bearish pin bar on Thursday, showing considerable weakness in the price action, following the European Central Bank (ECB) monetary policy announcement and dovish press conference by the ECB head Mario Draghi thereof. The long term sentiment remains bullish due to Higher High in the recent upward wave.
Technical Analysis
As of this writing, EUR/USD is being traded near 1.3833. A support may be noted around 1.3818 which is the confluence of 55 Simple Moving Average (SMA), trendline support and 50% fib level as demonstrated in the following chart. A break and daily closing below the trendline might trigger renewed selling interest, validating a dip below the 1.3700 handle.
On the upside, the pair is expected to face a hurdle near 1.3896, the 76.4% fib level ahead of 1.3993 which is the intraday high of yesterday. A break above 1.3993 will be eyeing initially 1.4000 and then 1.4070.
ECB Monetary Policy
The ECB kept the benchmark interest rate unchanged at 0.25%, in line with the median projection of different analysts surveyed by Bloomberg. The Euro showed skyrocket movement after the unchanged monetary policy but then reversed all the gains and closed broadly lower against almost all the major currency pairs because of the dovish tone by the ECB chief Mario Draghi during press conference. Draghi clearly said that the bank might adopt some unconventional instrument such as Quantitative Easing (QE), another cash rate cut or negative deposit rate to cope with the persistent slowdown in inflation.
Trade Ideas
Considering the huge bearish pin bar on the daily chart and dovish monetary policy tone by the ECB, selling the pair around the current levels could be a good strategy; the trade should however be stopped on a break above the intraday high of yesterday.