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ECB Preview: EURUSD Spikes Ahead of ECB Decision – What Next?

EURGBP Rebounds

The EURUSD pair is up by 0.20% ahead of the important European Central Bank (ECB) interest rate decision. The pair is trading at 1.1825, which is a few pips above yesterday’s low of 1.1750. The euro has also gained by 0.20% against the British pound.

There will be two main catalysts for the EURUSD today. First, the ECB will conclude its two-day meeting today and deliver its rate decision at 11:45 GMT. This will be followed by a press conference at 12:30 GMT.

According to Bloomberg, most analysts believe that the central bank has no incentives to hike or lower interest rates during this meeting. As such, they expect that the bank will leave the marginal lending facility unchanged at 0.25% and the deposit facility rate at -0.50%. Also, they expect that the bank will leave its quantitative easing plan at €1.35 trillion.

Still, some analysts are expected to ask Christine Lagarde about her plans for further stimulus later this year. In a statement, an analyst at Bloomberg said:

“The Governing Council may indicate next week that downside risks have intensified, signalling monetary policy could be loosened further before the end of the year.”

This rate decision comes at an interesting period in Europe. Recent data has shown that the bloc’s growth is stabilising after months of an upward trend. At the same time, the euro has continued to rise against major peers. Indeed, the so-called euro index is up by more than 5.60% in the past six months.

The EURUSD will also react to US jobless claims data. Analysts expect the data to show that more than 840k people applied for unemployment benefits in the previous week. If this happens, it will be the second consecutive week that the claims have been below 1 million in months.

EURUSD technical outlook

The daily chart shows that the EURUSD is in its second consecutive day in the green after it reached a low of 1.1750. The price has moved above the lower line of the ascending channel that is shown in blue. It is also above the 50-day and 100-day exponential moving averages.

Therefore, I suspect that the pair will continue rising as bulls attempt to test the upper side of the channel at 1.2000. On the flip side, a move below the lower support line at 1.1750 will invalidate this thesis.

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EURUSD technical chart


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