EUR/USD Forecast: how to trade the ECB


The EUR/USD pair is consolidating in  quite a limited range this Wednesday, as investors are waiting for the outcome of the upcoming ECB monetary policy meeting. Having flirted with the 1.1200 figure late Tuesday, the pair is now finding buyers on dips towards the 1.1120 region, a strong static support level. Early Europe, the Markit Services PMIs for the region for May, resulted all above 50, showing that economic expansion continued in the region, although the EU private sector economy lost momentum, expanding at the lowest pace in three months. 

Nevertheless, the readings were enough to trigger a tepid bounce in the pair that anyway trades in the red. According to the 4 hours chart, the pair may move south today, as the technical indicators are looking exhausted in overbought levels, signaling a bearish corrective movement ahead. However, the ECB decision will define the upcoming moves today. The focus will be on Draghi's words, with a positive assessment of the higher inflation and upward reviews of GDP and inflation forecast, favoring further advances in the common currency: a break through 1.1200 then, should see the pair extending its rally up to 1.1260 in the short term, with chances to extend up to 1.1300 if US data, released alongside with the speech, results disappointing.

Should the ECB president focus on the Greek ongoing woes, or express its concerns over the rising exchange rate of the EUR, the risk will turn towards the downside, with a downward acceleration below 1.1120 signaling a bearish continuation towards the 1.1050 price zone. 

View live chart of the EUR/USD



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