The euro-dollar pair was trading flattish during the London session on Thursday and was hovering around the 1.24 handle, waiting for the ECB monetary policy decision due later in the day.
Analysts are not expecting any changed to monetary policy and therefore the main refinancing rate will stay at 0.0%, whilst the deposit rate is forecast to remain at -0.4%. However, the following presser will be of more importance and traders will focus on Draghi’s remarks. The ECB already hinted that it might change the communication (i.e. the forward guidance) soon and if the statement will sound hawkish, it could provide a strong boost for the single currency.
From the US dollar point of view, the usual Thursday’s jobless claims will be released, with the market anticipating a slight uptick from 210,000 to 220,000. This number should not cause any major movement as investors will be listening to Draghi’s words at the same time.
The EURUSD pair bounced to the strong bearish trend line, which is around 1.2450, but failed to breach it. The bullish momentum is slowly fading and the pair is actually testing the very short-term support at 1.2390, where the horizontal trend line is located. If the pair drops below this level, further depreciation toward the next support zone near 1.2350 seems likely. The MACD indicator has already sent a bearish signal on the two hour chart.
On the other hand, if today’s ECB will be hawkish, bulls might push the pair toward the mentioned bearish line, which is currently at 1.2440 and if broken, the pair could accelerate toward the psychological level of 1.25. Volatility is expected to be elevated during the ECB presser. In all cases we strongly recommend to have rigorous money and risk management.
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