EUR/USD Forecast: Dreading Draghi, but these 3 ECB drivers could drive the Euro higher

• EUR/USD is trading in familiar ranges around 1.1300.
• All eyes are on the ECB decision and the lower forecasts.
• The technical picture remains bearish for the pair.

EUR/USD is hugging the 1.1300 level once again, trading in a narrow range as tension mounts ahead of the all-important decision by the European Central Bank. The big question is: how will they respond to the slowdown?

The ECB is set to leave its policy measures unchanged, and the focus will be on three things, that may turn out positive for the common currency.

1) Interest rate guidance: The Frankfurt-based institution pledged to maintain low rates "through the summer", thus implying a rate hike in September. Given the slowdown, markets see a hike coming only in 2020. Will they push back guidance or wait a bit longer? As September is still far, they may prefer to wait. It is important to remember that they have very few tools in the shed, and may opt to keep them dry for now. 

2) New forecasts: ECB President Mario Draghi will read out the new growth and inflation forecasts. Bloomberg already reported that the projections will undergo significant downward revisions. The news may already be priced in. The poor economic data is no secret. 

3) TLTRO: The Targeted Long Term Refinancing Operations program provides cheap funding to commercial banks in order to stimulate the real economy. The ECB may announce a new program. While the program provides liquidity and may devalue the euro, it will also provide relief to some southern European banks, allowing the euro to rise in response. 

Preview: ECB Preview: Lower macro projections set the stage for a prolonged period of policy stand-off

The ECB will make its announcement at 12:45 GMT and Draghi begins speaking at 13:30 GMT. 

Follow our live coverage here

And in the US

The Fed's "Beige Book" showed a moderation in the US economy at the wake of 2019, echoing data markets are aware of. New York Fed President John Williams repeated the message of "patience" on interest rates. However, his predecessor Bill Dudley cautioned that the Fed may still raise rates later in the year. 

The US ADP Non-Farm Payrolls report came at 183K, slightly below expectations but with a hefty upwards revision to 300K for January. The US labor market looks healthy, at least for now, ahead of Friday's Non-Farm Payrolls report.

See: Non-Farm Payrolls Preview: Labor market defiance

The US trade balance broadened to new records in 2018 according to the latest data, despite efforts from the Trump Administration to curb it. The news did not surprise markets but may have political implications. 

Fed Governor Lael Brainard will speak later in the day. US jobless claims and updated productivity figures will be of interest. 

There has been no significant development in US-Sino trade talks, but Huawei's official announcement that it is suing the US government weighs on sentiment.

EUR/USD Technical Analysis

The bears remain in control. Momentum points to the downside. The Relative Strength Index is leaning lower without pointing to oversold conditions. And the pair is trading well below the 50 and 200 Simple Moving Averages on the four-hour chart. 

Support awaits at 1.1290 which supported EUR/USD earlier in the week. 1.1275 was a low point in mid-February and 1.1250 cushioned the pair beforehand. 1.1235 is the 2019 low and 1.1215 was the trough in 2018.

1.1310 is fought over. The pair found support at this level early in the month. 1.1325 was a swing high on Wednesday while 1.1345 held it down beforehand. 1.1360 is where the 200 SMA meets the price. Far above, 1.1410 and 1.1420 are eyed.