A state of cautious stability dominates the performance of euro pairs, pending the most important event for the euro area this week, the monetary policy decisions of the European Central Bank. Since the start of trading this week, the price of the EUR / USD currency pair has stabilized in the range of the support level of 1.2165 and the resistance level of 1.2217, and it has stabilized. around the 1.2177 level at the time of writing. Today, the European Central Bank headed by Lagarde will provide key guidance on monetary policy in the euro area over the coming months. With a multitude of global central banks seeking to withdraw the extraordinary support they provided to their economies during the crisis. How could the ECB’s own positions have important implications for the euro?
Commenting on the event and the reaction, Ned Rambletein, currency analyst at TD Securities, said in the ECB summary: “All other things being equal, our base scenario in terms of a moderate to pessimistic outcome suggests risks to the decline for EURUSD this month. “And if anything, the increasingly tight market itself offers the potential for some decent moves on the outcome of the ECB event.
Currency markets will want to know if European Central Bank President Christine Lagarde and her team are considering whether it’s time to scale back their exceptional support for the economy, which includes ultra-low interest rates and generous quantitative easing . If the European Central Bank says the economic recovery will be strong enough for it to consider reducing support through its quantitative easing program – known as PEPP – in the future, the euro could s ‘appreciate against other major currencies.
Keeping the bank on its political numbers could create a more opaque flavor for European commerce.
The main theme of forex markets these days is how quickly global central banks are exiting their COVID-19 crisis support programs, those looking to get out early to see their currencies better supported. The New Zealand dollar, Canadian dollar and British pound are three currencies that have all recently benefited from such a change in direction from their central banks.
In general, global inflation rates are rising sharply, and some economists argue that central banks risk fueling this price pressure unless they start to control the amount of ‘easy money’ they provide through. through quantitative easing and ultra-low interest rates. By tightening their policies (raising interest rates and stopping quantitative easing), these central banks can help to curb inflation.
On the flip side, a low-key ECB announcement regarding the region’s economic outlook and a bullish outlook on inflation combined with a repeated steadfast commitment to maintain support could in turn lead to a weaker euro. As always, the ECB event matters as traders stick to every guideline and word from ECB President Christine Lagarde.
Technical analysis of the pair: As I mentioned in recent technical analysis of the EUR / USD pair, the return of the breakout of resistance 1.2200 to strengthen the uptrend of the pair and increase buying to move towards the resistance levels 1.2255, 1.2330 and 1.2400, respectively. These are important levels as they move technical indicators to overbought levels, which should start selling trades to take profit. On the downside, the movement towards the 1.2085 and 1.2000 support levels motivates the bears to control the trend and change the current outlook.
As for the data of today’s economic calendar: policy decisions of the European Central Bank, then statements by ECB Governor Lagarde. From the United States of America, US inflation figures have been released, the consumer price index and the number of weekly jobless claims.