The EURUSD is virtually unmoved at 1.10895 after the European Central Bank (ECB) left interest rates unchanged as expected. The key refinancing rate was held steady at 0.00%. The focus will now shift to the remarks by ECB President Christine Lagarde at 13:30 GMT, where she is may provide clues as to the monetary policy outlook for 2020 under her tenure.
What should traders look for?
The remarks by Lagarde are expected to cover the ECB’s strategic review, which is the first time in 2 decades that the bank is reviewing its interest rate policy with regards to it inflation target. As mentioned in my preview of this release yesterday, traders would be watching to see if the references to the inflation target, which have typically been “at or below 2%”, would change to “around 2%”.
A change in the wording of the references to the inflation target could mean that the ECB would be willing to allow rates to remain as they are even if inflation exceeds the 2% target marginally. Coupled with the quantitative easing program already in place, this could be viewed as EUR-negative in the short-term.
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Technical Outlook for EURUSD
The pair maintains its price levels, with 1.10630 remaining the downside barrier that has stopped this currency pair from trending downwards after breaching the wedge’s lower border. It has to take a decisive close below this support level to create a clear path towards a continuation of the secondary bearish trend on the pair towards 1.09332 (double bottoms of Nov 13 and Nov 27 2019). Further downside to 1.09142 completes the measured move from the wedge’s broken border.
On the flip side, price recovery which breaks above the wedge’s lower border and the 1.11023 resistance (neckline of double bottoms of Nov 13/27 2019) sends the pair along its way to the upper wedge border. This move has to contend with another resistance at 1.11667 (double tops of Sept 18 and Oct 1 2019) and must overcome it to reach the wedge’s opposing border. This move may be an opportunity to sell on rallies, if the technical picture is to be respected.
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