Today we shall take a look at the EUR/USD currency pair. Last week the euro was unable to keep up its previous bullish momentum, but it only slumped a little. The rate of this pair remains at a multi-year maximum just above 1.18.
The week ahead will be crucial for the euro’s further development, largely due to a European Central Bank policy meeting taking place this Thursday. Last week several of the ECB’s most important economists announced that the bank does not wish to see the euro climb above 1.20. The appreciation of the single European currency could be harmful to its economic recovery, which is why the ECB wants to keep the euro in check. Because inflation is likely to be less than ideal in the eurozone, the ECB could take a page out of the Federal Reserve’s book and commit to low interest rates in the long term, together with more aggressive asset purchasing, should the euro strengthen above the 1.20 target. Because monetary policy is more important at the moment, any fundamental reports out of the eurozone this week will likely not have an impact on the EUR/USD. With the decision to keep the rate below 1.20, the euro is most likely going to weaken in the near future.
The US dollar, meanwhile, is still under the influence of the same factors as last week. The reserve currency has weakened due to the Federal Reserve’s decision to switch to average inflation targeting, which sets the table for a looser monetary policy in the next couple of years. In addition, the dollar is experiencing volatility due to the upcoming presidential elections in the United States. That being said, the EUR/USD is now moving in favor of the dollar, but it is important to acknowledge that the bearishness results from the euro’s weakness, not from any significant strengthening in the US dollar.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1838, with the price currently trading below it. The daily support levels lie at 1.1828 (overcome) and 1.1821. The daily resistances are located at 1.1844 and 1.1855. The indicators of technical analysis agree in strongly recommending a sell position today.
