Risk aversion lead the way during Asian trading hours, on mounting concerns over China's economic health and a pullback in oil, with most commodities generally lower. European indexes opened lower, tracking losses of the previous session, but are currently trading around their daily openings, weighing on the common currency.
The macroeconomic calendar will remain light in Europe and the US, with the most relevant readings being probably US crude stockpiles, later on the day, which means the pair will continue responding to market's sentiment, although in cautious mode, ahead of the ECB decision this Thursday.
Market players have been largely speculating that the European Central Bank will offer some form of extension in its ongoing stimulus plan, contemplating the possibility of an additional 10-15bp rate cut in the deposit rate. However, and given that inflation has fell into negative territory last month, some speculators are expecting an extension of QE or another measure to complement the deposit rate cut. Mario Draghi always has something up his sleeve, and the market is being extremely cautious forthcoming.
View the Live chart of the EUR/USD
Technically, the pair is now 100 pips below the high post in the previous American afternoon at 1.1056, having failed to sustain gains beyond the 38.2% retracement of the latest daily slump, around 1.1040. In the 4 hours chart, the price has broken below its moving averages, while the technical indicators are heading slightly lower below their mid-lines, increasing the risk of additional declines towards the 1.0940 level, this week low.
Further declines are not expected ahead of the mentioned risk event, yet if somehow the EUR enters sell-off mode, the pair can test the 1.0890 region. A recovery above 1.1000 on dollar's weakness can send the pair towards the 1.1040 region, but seems unlikely investors will force the pair into new highs today.
Latest updates on the EUR/USD Forecast
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