EUR/USD Forecast: Hardly holding up critical support ahead of Draghi

The EUR/USD is trading around $1.2170, slightly higher on the day but trading in a limited range. The cautious trading is unsurprising ahead of the rate decision by the European Central Bank due at 11:45 GMT.

The ECB is expected to leave all its policy measures unchanged. The primary lending rate is likely to stay at 0%, the deposit rate at -0.40%, and the QE program at 30€ billion per month until September. The Frankfurt-based institution is also projected to refrain from any tweaks to the statement as it did in the previous decision, nor make any announcements about the future of the bond-buying scheme. 

The focus is therefore on the ECB's views on the recent signs of a slowdown in the euro area. Both hard data relating to actual economic performance and soft, survey data that looks into the near future have been disappointing of late. The latest figure that was released is no different: Spain's unemployment rate rose to 16.7%, worse than a drop to 16.3% that had been on the cards.

Will ECB President Mario Draghi acknowledge the downturn? If so, the common currency could resume its falls. If continues projecting optimism about growth and reaching the inflation target, the current bounce can turn into a considerable recovery.

See: ECB Preview: No action on QE front and rising US Treasury yields make Euro’s slide lower becoming its destiny

The broader theme in markets remains the rise in US bond yields. The benchmark 10-year Treasuries holds onto the high ground above 3%. Other maturities such as the 2, 5, and 7-year yields are also at multi-year highs. The increase in long-term lending rates in the US is aiding the US Dollar and it behind the recent rises.

The US publishes its Durable Goods Orders report at 12:30, at the same time that Draghi begins his press conference. The data feeds into the more critical GDP publication due on Friday. Slower growth is forecast for Q1, but that is already priced in by the markets and by the Federal Reserve. 

More: US GDP Preview: Slower growth unlikely to slow the USD, three scenarios

EUR/USD Technical Analysis - Bears are gaining strength

The $1.2155 level is a critical line of support. The pair got close to this level early in the day but refrained from making the break. This is the low on March 1st. A break to lower ground will send the pair to the weakest since early January. Further support awaits at $1.2090, the peak of 2017. The very round level of $1.2000 is next down the line.

Looking up, $1.2210 supported the pair on April 8th and $1.2240 cushioned a fall in March. The 50-day Simple Moving Average awaits at $1.3222. 

The pair broke below downtrend support which accompanied the pair since mid-March. The RSI is well below 50 and Momentum is gaining traction to the downside. 

More: EUR/USD holding tight to the edge of the cliff — Confluence Detector