The euro is climbing steady ahead of the key ECB meeting that is due today. Looking at the price action structure, we can see that following the last Friday unexpected slump the price had managed to stabilized and it is now trading again above the 4h-chart 20 EMA, confirming that the bull are driving the order flow.
Further gains on the upside if the ECB delivers
On our chart below, you can see that the price was building up on the upside, being supported not just by the 20 EMA but also by an ascending trend line as well. Buying on pullback can be an effective forex trade, since thus far the buyers are treating each retracement lower as a new buying opportunity.
If the trend will extend on the upside, the price should manage to reach 1.1979, Friday high and if the ECB will give any further hints regarding the tapering of their massive QE program, we expect a further continuation towards 1.2069, where last month high is located.
On the other hand, if the ECB will maintain the cautious tone as it did until now, short-term euro weakness might prevails. If the trend line will be broken on the downside, selling pressure might follow then, offering the potential for a nice selling forex trade.
However, the market might be choppy ahead of the event, so trading activity should be limited until then.
The euro had been trading upward since January this year, starting from the 1.0340 area and reaching a high of 1.2069 last month. Even if the ECB will remain cautious, the downside should remain limited. The asset purchases program will expire in December and the current economic conditions support a move towards a conventional monetary policy. Since GDP expansion is on the way up and inflation above 1% and heading towards ECB target of below but close to 2%, the market had been speculating that the tapering might begin this autumn and it had good reasons to do so.
Now that the autumn is here, the ECB can’t avoid anymore to talk above the reduction of the QE program and todays’ meeting might bring up new information regarding that issue.
To sum up, the Press Conference is expected to provide some new and important information which should have a strong impact on the EURUSD today and most likely for a few days at least.
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