The EURUSD is extending last week’s gains this Monday, as the ECB prepares to hold its October monetary policy meeting on Thursday. This meeting is going to be Mario Draghi’s final meeting as ECB head, as outgoing IMF Chief Christine Lagarde prepares to take his place.
However, the EURUSD is likely to experience some strong headwinds in the days ahead. On Thursday, the German Flash Manufacturing and Services PMI data will be released. Analysts are predicting a modest expansion of 0.3 points above the previous figure of 41.7. However, the Bundesbank in its monthly economic report has stated that “Germany’s economic output could have shrunk again slightly in the third quarter of 2019.”
The ECB meeting is not expected to produce any dramatic changes to the decisions of the last meeting. However, the divergence in views between the ECB board members could continue to be a talking point: how will this play out with Lagarde scheduled to take the reigns soon?
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Outlook for EURUSD
The EURUSD has broken above the downward channel and is testing the resistance at 1.11647 formed by the 50% retracement level from a swing high of March 20 to the swing low of October 1. This is also the site of previous highs of April 26, July 30 and August 26 on the daily chart. The daily candle presently forms a doji, indicating unwillingness of buyers or seller to break the equilibrium for now.
A break above the current resistance could open the door for price to test the August 7-13 highs at 1.12298, which is also where the 61.8% retracement level lies. Failure to break the current resistance could return price back to the 38.2% Fibonacci retracement area of 1.11647, which is where the lows of May 23 and July 25 congregate.