EURUSD is ready for the ECB with target 1.07!

24 янв.

The EUR/USD exchange rate is advancing significantly after two consecutive days of retracement, although a convincing break of the 1.0900 barrier remains elusive at the moment. The prospects for the pair are expected to turn bearish if it sustains a convincing breach of the crucial 200-day moving average, currently at 1.0844. On the upside, the weekly level of 1.0998 (January 11) must be surpassed to open the door to a possible visit to the December high of 1.1139 (December 28). Based on the 4-hour chart, the pair seems to have returned to a consolidation phase. The unexpected and intense dollar sell-off has allowed the EUR/USD to shake off some of its recent weakness and refocus on the upside, surpassing the 1.0900 threshold to print new multi-day highs. The USD Index (DXY) has succumbed to the prevailing risk-friendly environment and dropped below the 103.00 region despite the rise in U.S. yields along the curve, while speculations continued to indicate decreasing bets on a Fed rate cut in March, favoring a rate reduction in May instead. Also contributing to the renewed buying interest in the pair, advanced PMI readings in Germany and the Eurozone came in on the strong side for January, highlighting a revival of economic activity in the region and suggesting the possibility of a soft landing for the regional economy. With the upcoming ECB event in mind, it is important to emphasize that market participants have already priced in about 120 basis points of rate cuts for the current year. However, there is a growing debate among market participants and decision-makers at the ECB regarding when the central bank will decide to implement a policy rate reduction for the region. Additionally, President Lagarde has hinted at the possibility of a potential move during the summer. Tomorrow will be a truly interesting day, with no cuts expected, and the euro-dollar heading towards 1.07 as indicated by the chart. Greetings and happy trading to everyone from Nicola.