EUR/USD Approaches Key Support Area As ECB Monetary Policy Looms

FXOpen

The Euro extended downside movement against the US Dollar this week, dragging the EUR/USD to less than 1.3600 ahead of the European Central Bank (ECB) monetary policy announcement in which the policymakers are expected to announce some unconventional policy instruments. The sentiment remains bearish due to Lower Low (LL) in the recent wave.

Technical Analysis

As of this writing, the pair is being traded near 1.3610. A huge support may be noted around the trendline as demonstrated in the following chart. A break and daily closing below the trendline will trigger a renewed selling pressure, validating a deeper correction towards the old levels of 1.3000-3300, the ECB monetary policy outlook also favors this case.

eurusd-w1

On the upside, the pair is expected to face a hurdle near 1.3642, the 200 Simple Moving Average (SMA) ahead of 1.3700, the 23.6% fib level and psychological number.

Eurozone Inflation

 Inflation in the Eurozone slumped surprisingly to 0.5% in May as compared to 0.7% in the same month of the year before, down beating the median projection of 0.7%. The poor inflation figure has spurred speculation that the ECB might announce Quantitative Easing (QE), another cut in the cash rate or negative deposit rate during the forthcoming monetary policy meeting which is scheduled later this month. The announcement of any unconventional measure might trigger huge selling pressure in the Euro pairs, threatening the long term trendline support of the EUR/USD.

Conclusion

There could be two trade strategies for EUR/USD. If the ECB leaves the monetary policy unchanged then buying the pair around the current levels appears to be a good strategy. On the other hand, if we see some harsh policy action from the central bank then selling the pair on a daily closing below the trendline will be a good strategy.

Trade over 50 forex markets 24 hours a day with FXOpen. Take advantage of low commissions, deep liquidity, and spreads from 0.0 pips. Open your FXOpen account now or learn more about trading forex with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Forex Analysis

Analysis: EUR/USD Close to Year’s Low after ECB Decision USD/JPY Rises to Highest Since 1990 The US Dollar Rose Sharply after Inflation Data. When Is Correction Possible? NZD/USD Rate Increases after the Decision of the Reserve Bank of New Zealand Market Analysis: GBP/USD Recovers While EUR/GBP Dips to Support

Latest articles

Weekly Market Wrap With Gary Thomson: FTSE, NZD/USD, USD, USD/JPY
Financial Market News

Weekly Market Wrap With Gary Thomson: FTSE, NZD/USD, USD, USD/JPY

Get the latest scoop on the week's hottest headlines, all in one convenient video. Join Gary Thomson, the COO of  FXOpen UK, as he breaks down the most significant news reports and shares his expert insights.

  • FTSE 100's Holy Grail
Indices

S&P 500 Price Consolidates ahead of Earnings Season

On April 4, we wrote that the S&P 500 is showing signs of weakness around the 5,250 level. How is the situation on the stock market developing by today, which is the start of the reporting season

Forex Analysis

Analysis: EUR/USD Close to Year’s Low after ECB Decision

As predicted by analysts, the European Central Bank did not change the interest rate yesterday, keeping it at = 4.50%. This morning the EUR/USD rate is near the psychological level of 1.0700, which approximately corresponds to the 2024

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.