EUR/USD is trading sideways as investors focus on the ECB monetary policy statement. The event, which is scheduled for Thursday’s session, comes two weeks after the central bank’s strategy review. The bank hiked its inflation target from ‘below but close to 2%’ to the more definite 2%. Subsequently, undershooting or overshooting will be allowed when necessary.
While investors expect ECB to keep the QE and interest rates unchanged in the short term, the focus will be on the central bank’s forward guidance.
The bank is tasked with convincing investors that it will neither tighten its monetary policy prematurely nor allow prices to spike beyond control. Notably, a dovish stance will curb gains by EUR/USD.
EURUSD technical outlook
EUR/USD is trading sideways after rising from an intraday low of 1.1751 in the previous session. As of 06.56 GMT, the currency pair was up by 0.02% at 1.1796. Since late on Wednesday, it has been trading within a tight range of 1.1785 and 1.1800.
On a two-hour chart, it is slightly above the 25 and 50-day EMA. With an RSI of 54, the outlook is rather neutral. However, I hold a bearish bias based on ECB’s expected dovish stance.
In the near term, the support level is likely to remain at 1.1781. However, as a reaction to the ECB monetary policy statement, the currency pair is likely to drop further to Wednesday’s low at 1.1750. Past that level, the bears’ target will be at the psychological level of 1.1700. However, a move above 1.1815 will invalidate this thesis.