The EURUSD pair has fallen lower in recent sessions to trade close to levels not seen since early January ahead of the latest ECB announcement. The ECB are expected to announce this lunchtime that they will keep all rates and asset purchases unchanged following their latest policy meeting, but traders will be focusing closely on the accompanying statement and subsequent Draghi press conference for any hints as to the future policy path.
EURUSD consolidation set to end?
For the last 4 months the EURUSD rate has remained in a relatively narrow range from 1.2155-1.2555 after the large gains seen in 2017. A period of consolidation after a large move is typical of markets, but there is some suggestion that this could be set to end shortly. Any significant dovish alterations to the statement or president Draghi’s tone could see the single currency drop lower and tke out what has become quite a significant technical support level at 1.2155.
Softening of data to cause dovish tweak?
2017 was very good year for the eurozone with Macron’s victory in the French election dispelling the notion that a populist uprising would threaten the bloc’s existence and economic data improved markedly as the region looked to gain further traction in its recovery. Together these dual forces contrived to push the Euro firmly higher, but recent data points seem to indicate that some of the upwards momentum has been lost. Furthermore, the most recent inflation reading came in lower than expected and this will likely weigh on the minds of those in the Governing Council who will no doubt be cautious of tightening policy too quickly when inflationary pressures remain well below their target.