EUR/USD forecast: Remains confined in a broader trading range ahead of the key central bank meetings


  • Dovish ECB expectations exert some heavy pressure on the shared currency.
  • The USD gains some traction amid tempered aggressive Fed rate cut hopes.
  • The recent range is likely to remain intact ahead of this week’s ECB meeting.

The EUR/USD pair once again failed near the 1.1280-85 supply zone and came under some heavy selling pressure on Friday. The shared currency was weighed down by a report from a German news magazine, Der Spiegel, suggesting the European Central Bank (ECB) was planning to resume its bond-buying program by November. The pair tumbled back closer to the 1.1200 handle and was further pressurized by resurgent US Dollar demand, supported by the fact that St. Louis Fed President James Bullard partly ruled out the possibilities of 50 bps rate cut at the July meeting.

Bullard said that a 25 bps rate cut seems appropriate as the current US economic condition doesn't warrant a larger cut. It is worth reporting that bets for 50 bps Fed rate cut had surged following the New York Fed President John William’s comments on Thursday that indicated aggressive rate cut in the upcoming FOMC meeting on July 30-31, though walked back on hid dovish comments by saying that the speech was not about potential policy action at the upcoming meeting.

Nevertheless, the pair ended the day and the week in the red, albeit managed to defend the 1.1200 round figure mark and remained well within a broader trading range held over the past two weeks or so. Investors still seemed reluctant to place any aggressive bets and preferred to wait on the sidelines ahead of the highly anticipated central bank meetings. The ECB is scheduled to announce its latest monetary policy update later this week, which coupled with the flash Euro-zone PMI print will influence the market sentiment surrounding the shared currency. 

In the meantime, traders are likely to take cues from the Bundesbank's monthly economic report and the USD price dynamics, which might produce some short-term opportunities on the first trading day of the week amid absent relevant market moving economic releases.

From a technical perspective, the recent range-bound price action now seemed to have constituted towards the formation of a rectangle on short-term charts, suggesting indecision over the pair's near-term trajectory. Hence, it will be prudent to wait for a decisive breakthrough the 1.1200-1.1300 band before traders start positioning for the next leg of a directional move.

Sustained weakness below the 1.1200-1.1190 region will be seen as a fresh bearish breakdown and set the stage for a further near-term depreciating move towards the 1.1125 intermediate support en-route yearly lows, or closer to the 1.1100 round figure mark. Alternatively, decisive breakthrough the 1.1300 handle, leading to a subsequent move beyond the 1.1325-30 supply zone might negate any near-term bearish bias and assist the pair to aim back towards reclaiming the 1.1400 round figure mark with some intermediate resistance near the 1.1365 region.

fxsoriginal

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

Latest Forex Analysis

Editors’ Picks

GBP/USD extends gains toward 1.31 after upbeat UK wage figures

GBP/USD is extending its gains and advancing toward 1.31 after UK wage figures beat expectations with 3.2% annually. The unemployment rate remained at 3.8% in November. 

GBP/USD News

EUR/USD recaptures 1.11 amid upbeat German figures, USD weakness

EUR/USD is trading above 1.11 after the German ZEW Economic Sentiment beat with 26.7 points. Presidents Trump and Macron agreed not to slap tariffs on each others' countries. The US dollar is retreating.

EUR/USD News

Market delays the trip to the moon

The crypto markets continue to turn to a new bullish phase. This turnaround began at the beginning of the year after a consolidation phase that started in mid-2019. 

Read more

Gold retreats from 2-week tops, drifts into negative territory

Gold failed to capitalize on its early uptick to near two-week tops and dropped to fresh session lows, around the $1560 region in the last hour.

Gold News

USD/JPY: Weaker near 110.00 amid China virus fears, BOJ's status-quo

The Japanese yen retains the bid tone following the Bank of Japan's (BOJ) status-quo, keeping USD/JPY under pressure near the 110 level amid risk-off market profile. S&P 500 futures drop 0.40% while the US Treasury yields are down over 1.50%, as the sentiment is hit by the coronavirus outbreak. 

USD/JPY News

Forex Majors

Cryptocurrencies

Signatures