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 global forex with the Innovative Broker of 2022*. Choose from 50+ forex markets 24/5. Open your FXOpen account now or learn more about trading forex with FXOpen.

* FXOpen International, Innovative Broker of 2022, according to the IAFT

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

European Currencies at Strategic Levels EUR/USD, GBP/USD, USD/JPY Analysis: US Dollar Falls to Its Lowest Level Since Mid-August EUR/USD Analysis: Price Reaches the Level of 1.1000 Market Analysis: EUR/USD Extends Rally While USD/JPY Nosedives USD/JPY, GBP/USD, and EUR/USD Market Analysis: The US Dollar Continues to Fall

Latest articles

Forex Analysis

European Currencies at Strategic Levels

The downward trend in the US currency continues to gain momentum. Thus, the euro/dollar pair yesterday tested important resistance at 1.1000, the pound/dollar pair strengthened to 1.2700, and the usd/cad pair fell below 1.3600.

Indices

Market Analysis: Stock Market Reaction to US GDP News

According to data released yesterday, the US economy is growing at a stronger pace than expected. Thus, US GDP in the 3rd quarter increased by 5.3% in annual terms (an increase of 4.9% was expected). Combined with softening

Cryptocurrencies

BTC/USD Analysis: New High for the Year Shows Bulls Are Indecisive

During November, the price of bitcoin increased by approximately 10% in anticipation of the launch of a bitcoin ETF. But the positive sentiment of crypto investors is seriously overshadowed by news regarding Binance: → Changpeng Zhao resigned as head of Binance.

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.