EURUSD Forecast: ECB Ahead “Upside is capped”
ECB Interest Rates decision and Eurozone GDP will be released today. There is a high risk of volatility during the press conference.
I do not expect any big change to boost Euro. The general message should remain cautious with the ECB attempting to avoid unintentional tightening of monetary conditions. Here a potential hint at further TLTROs should reinforce such a message.
Why is the upside is limited for EURUSD? The following two reasons are more than enough.
- The rate differential between the USD and EUR intact.
- The lack of catalysts for a more meaningful reversal in the dovish ECB stance ( Slowing down Eurozone Economy, Political Turmoil, Brexit Uncertainty
Unless any positive data surprise translates into a shift in the ECB stance (from the current cautious tone to a more hawkish stance ) I do not think EURUSD to break above 1.15600.
I see it unlikely that the ECB will deliver a meaningful tightening near term (as core CPI will remain below the target)
Until we see clear data evidence which can be a catalyst to Hawkish ECB, we plan to sell all possible throwbacks.
Looking at the matter technically, the pair is trading below 1.13600 resistance and under bearish pressure. Our near term targets are 1.12700 and 1.12200.
A firm H4 closing above 1.13600 may carry the price towards 1.14300 where we see a strong technical resistance.
Conclusion: We keep our short positions with targets 1.12700 and 1.12200
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