EUR/USD: Bulls return ahead of ECB policy
|The euro bulls have taken support at one-month low on revival in risk appetite and broad weakness in greenback. The uptrend will depend on tonight's Joe Biden's inauguration and tomorrow's ECB monetary policy. It is obvious that Biden will get majority in the Congress and propose more stimulus, however, the inflationary pressure in the US may cloud the firmness in euro.
Meanwhile, tomorrow is the ECB policy and the decision would not provide any firework to the market. The policy is unlikely to make tangible adjustments to the current monetary policy set. At the last policy, the central bank had increased the pandemic emergency purchase programme (PEPP) by EUR500 billion to a total of EUR1.85 trillion. Also, the ECB will leave the three main rates steady. But the focus will be on Lagarde's statement regarding the downside risks for the region, with new Covid-19 strains and rising cases ensuring heightened economic restrictions for the region. However, Lagarde's lack of jawboning could lift the euro.
The daily chart highlights the recent pullback from key support at one and a half month's low of $1.2059. The wider uptrend remains intact despite recent downside, with the recent weakness likely to form a retracement. The EURUSD is trading within the Rising Channel range and is currently hovering near 1.2150. The pair have also witnessed a Hidden Bullish Divergence with prices giving higher lows and RSI indicating lower lows. The immediate resistance is seen at 1.2165/1.2170 which is 38.2% Fibonacci Retracement level as well as Bollinger band's medium level and a breach of this mark will lead the EURUSD towards 1.2235 (key 61.8% Fibonacci Retracement level). Only a consistent trading above 1.2235 will open doors for 1.2290 mark (78.6% Fibonacci Retracement level as well as Bollinger band's upper level) and then 1.2350. Meanwhile, on the downside, crucial support zone is located at 1.2080/1.2050. If it falls and consistently trades below 1.2050 then next support lies at 1.1970-1.1890.
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