The Euro edged higher on Thursday morning and partially reversed a two-day pullback from new multi-week high (1.0915), but today’s action was so far choppy and lacking direction, as traders await the verdict from the ECB later today.
The European Central Bank policymakers meet today and widely expected to deliver the first rate cut by 25 basis points (3.75% from 4.0%), which will point to progress made in a battle with high inflation, despite the fight is not over yet.
More significant will be the comments from President Lagarde in the following press conference, which will give more details about ECB’s next steps, in light of the impact from high borrowing cost to the economy and sticky services inflation.
Overall, ECB’s hawkish stance (signals that the central bank may not show readiness to continue policy easing but will turn to more cautious mode) is expected to be positive for the single currency, while dovish view would increase pressure on Euro.
The ECB has been criticized for waiting for the Fed to take the first step before starting to cut rates, so today’s action could be seen as reaction to such comments and proof of the central bank’s independence.
But this is not to be the main issue, as the central bank faces much bigger problem of being squeezed by two strong and opposite forces – sticky inflation which still holds away from 2% target and requires tighter monetary policy and weakening economic conditions from high interest rates and persisting reverse impact from a massive economic sanctions on Russia, which hurts the most EU’s largest economy – Germany.
Technical picture on daily chart is bullish, as positive momentum is picking up and MA’s in bullish setup continue to underpin.
Near-term bias is expected to remain with bulls while the price action stays above daily Tenkan-sen (1.0852), while break here would weaken near-term structure and allow for deeper pullback, but larger bulls to remain in play if strong supports at 1.0800/1.0790 zone (psychological / Fibo 38.2% of 1.0601/1.0915 / daily Tenkan-sen) contain extended dips and mark a healthy correction of a larger uptrend.
Conversely, sustained break of recent tops (1.0895/1.0915) to signal bullish continuation and expose key barriers at 1.1000 zone (2024 top / psychological).
Res: 1.0895; 1.0915; 1.0942; 1.1000.
Sup: 1.0852; 1.0841; 1.0795; 1.0758.
