Today’s ECB meeting poses downside risk to the EUR as we look to President Draghi’s press conference, the statement tone, and expectations for continued caution. Let’s take a look at EURUSD Technical Analysis ahead of March ECB MEETING
09 March, AtoZForex -The ECB is expected to keep policy unchanged in today’s’ meeting.Although, their quarterly economic projections and Mario Draghi’s press conference, we can be assured that there will be strong volatility in EUR/USD today. Since the last monetary policy meeting in January, inflation picked up significantly with broad improvements in manufacturing and service sector activity. The German labor market also availed from robust labor market conditions but the ECB said on a few occasions that they would look beyond a transient rise in inflation.
More recent data such as the German IFO report, trade balance, and industrial production showed pockets of failing. This should worry a central bank who is not convinced that the rise in inflation and the general recovery is long-lasting. So while EUR/USD could rise on improved economic forecasts, Mario Draghi is likely to stress the need to preserve the ECB’s accommodative stance with policy rates ‘at present or lower levels for an extended period of time’ while reiterating an intention to continue the asset purchase program until the end of December 2017, or beyond’.. At the end of the day, the ECB desires a weaker euro to boost the economy.
EURUSD Technical Analysis ahead of March ECB MEETING
From the technical standpoint, EURUSD is seen to be forming a wedge pattern (bullish wedge) on the daily chart. The top of the wedge also coincides nicely with its 100-Day Moving Average. Levels to be watched closely during and after ECB meeting is the top of the channel at 1.0650s, a break of this resistance zone will have price accelerate to the 1.0850 level. Alternatively, a break below 1.0520 with a daily close below this level will have price rotate back to the bottom of the rising wedge. However, as long as the lower trendline supporting the bullish wedge remain unbroken, we maintain our views on the EURUSD going forward.
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