… ECB apathy seen as most likely scenario
Although there are almost no chances of the ECB delivering a 25 bps rate cut in today’s gathering, the idea would continue to hover over the FX community, pointing to the upcoming meetings as the most likely opportunity to implement it.
What does the ECB has to offer then? Well, in terms of surprising the markets the central bank would bring nothing this time, as the lending benchmark would remain intact at 0.75%. However, the later press conference by President Mario Draghi has the potential to spark the fireworks - if any - although room is scarce to hint at any sort of positive developments in the euro bloc, as the recent weakness seen in the fundamentals plus the below-estimates figures of LTRO’s repayments would point to the opposite direction. In addition, the other possible scenario would be of a similar tone than the one seen at the previous meeting, allowing the single currency the chance to gather some traction and escalate further up, although this bull run should be temporary.
The cross is now navigating within a down-channel set from February highs above 1.3700, and while trading below the upper band the bias would remain bearish.
Further attempts to regain ground lost would find interim resistance at 1.3076 (38.2% Fibonacci retracement of the July’12 – February’13 upside) ahead of the area around 1.3170/1.3200, where sit the 100-day moving average and the down trend set from February tops.
On the downside, a break below 2013 lows at 1.2966 would accelerate the pullback to 1.2929/1.2885 (December lows, 50% retracement and 200-day moving average) en route to 1.2680/60 (November lows and 61.8% retracement).