Today we shall take a look at the EUR/USD currency pair. Though last week there was a bit of a recovery in the price of the euro, since Thursday the trend has been bearish again. The price has dropped to a monthly low.
This week, Thursday will be a big day for the euro, as the European Central Bank will gather for its first monetary policy meeting of the year, and will have to produce a rate decision as well. The ECB has remained predictably dovish over the last few years since inflation stubbornly remains far from the desired golden level of 2%. However, at present the ECB is not expected to lower lending rates any further. New ECB President Christine Lagarde has spoken a number of times about the need of European countries with budget surpluses such as Germany and the Netherlands to fund their own stimulus programs and boost inflation, instead of relying on the ECB for all monetary easing. On account of this, as well as the remaining risks to the global economy, the euro doesn’t have many reasons to strengthen.
Meanwhile, the US dollar faces an altogether different set of challenges, though it still retains its status as the strongest currency in the world. Recent data on the US economy has been positive. However, somewhat paradoxically, this might not be in favor of the USD, since it boosts market optimism and risk appetite, which drives interest away from the reserve currency, causing it to soften in price. With good data and a deal with China, investors just cannot care for the dollar at the moment. Though the Federal Reserve will not lower interest rates anytime soon, the bank’s efforts to increase liquidity might also contribute to a weaker dollar. Still, even in this scenario, the USD will remain strong against the euro.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1093, with the price currently trading below it. The daily support levels lie at 1.1091 and 1.1086. The daily resistances are located at 1.1097 and 1.1100. The indicators of technical analysis recommend a strong sell today.
