The closer the ECB meeting on monetary policy issues, the more the degree of nervousness of traders increases. Since the beginning of June, the EUR/USD has been trading at levels it was two months before the victory of Donald Trump in the US elections, but failed to break through November 9 at 1.1300.
The dollar, meanwhile, continues to give way. Investors avoid active action on the eve of tomorrow's meeting of the ECB. The assets-shelters, such as state bonds, yen, gold, franc, are in great demand these days. The yield of 10-year US government bonds on Tuesday fell to the lowest level for more than six months, to the level of 2.147%.
Also in the media there were reports that China was going to increase the volume of purchases of US government bonds. If this really happens, then the fall in the yield of government bonds will intensify, putting additional and serious pressure on the dollar.
The WSJ dollar index, reflecting the value of the US currency against the basket of 16 currencies, on Tuesday decreased by 0.15%, to 88.15, i.е. level in the day of the presidential elections in the US in November. Despite the fact that the dollar index rose to a 14-year high after President Donald Trump was elected, in the last few months he again fell against the backdrop of uncertainty surrounding the prospects for the new economic program of the new president.
For today, the economic calendar is empty. Traders are preparing for tomorrow, full of political and economic events.
In addition to the ECB's interest rate decision tomorrow (11:45 GMT), and at 12:30 ECB's press conference will begin, tomorrow the parliamentary elections will be held in the UK, and in the US before the Congress the former head of the FBI, James Comey will testify in the case of possible interference by Russia in the election campaign.
Tomorrow, a surge in volatility is expected across the financial market. The most cautious investors prefer to be out of the market these days.
The dollar continues to remain under pressure in the foreign exchange market, however, the EUR/USD pair has not yet been able to break through the resistance level 1.1280 (Fibonacci level of 23.8% corrective growth from the lows reached in February 2015 in the latest wave of global pair decline from the level 1.3900).
The positive dynamics of the pair remains. The EUR/USD is trading at the top of the rising channel on the daily chart. Market participants expect that on Thursday the ECB will maintain the current monetary policy, but will not give signals about its easing. If the ECB only hints at the possibility of considering the issue of curtailing the QE program, then the euro will strengthen sharply in the foreign exchange market.
In the event of a breakdown of the local maximum and the resistance level of 1.1280, the immediate target will be the resistance level (144-period moving average on the weekly chart). But this level can be passed soon. The remote medium-term goal in this case is level 1.1600, through which the 200-period moving average passes on the weekly chart. At least, technical indicators on the weekly and monthly charts signal exactly about this development of events.
The reverse scenario is related to the return of the EUR/USD pair into the channel on the daily chart and to the support level of 1.0890, through which the 200-period moving average passes on the daily chart.
Support levels: 1.1245, 1.1215, 1.1185, 1.1155, 1.1120, 1.1100, 1.1020, 1.1000, 1.0950, 1.0890
Resistance levels: 1.1280, 1.1340
Trading recommendations
Sell Stop 1.1230. Stop-Loss 1.1290. Take-Profit 1.1215, 1.1185, 1.1155, 1.1120, 1.1100, 1.1020, 1.1000, 1.0950, 1.0900
Buy Stop 1.1290. Stop-Loss 1.1230. Take-Profit 1.1300, 1.1340, 1.1400, 1.1600
