The EUR/USD pair trades within a 40 pips range this Thursday, as investors are waiting for the first major event of the week: the ECB will have its economic policy meeting, including economic forecasts and a statement, in a couple of hours.
Additionally, Chinese markets have been closed due to a local holiday, and will remain closed until next week, which means the main risk factor that has been moving the markets these days is temporarily of. In Europe, stocks are strongly up supported by the latest manufacturing and services PMIs in the region that suggest the EU recovery is proceeding at pace. The EU Markit composite for August rose to 54.4 from previous 54.3, with only the French reading missing expectations.
Despite growth seems to be picking pace, the problem continues to be depressed inflation readings, which may force ECB's President, Mario Draghi a generally dovish stance, and remark that the Central Bank is willing to do whatever it takes to reach its 2.0% target.
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Technically, a slightly negative tone prevails, as the price is developing below its 20 SMA in the 4 hours chart, whilst the technical indicators present a neutral-to-bearish stance, standing slightly below their mid-lines. Nevertheless, upcoming movements will depend on how the market understands Draghi's words.
The main resistance level comes at 1.1280, 61.8% retracement of the past two weeks rally. An advance beyond the level should see the price spiking towards the weekly high around 1.1330, while beyond this last, the rally can extend up to 1.1360, 50% retracement of the same rally.
Below 1.1200 on the other hand, the risk turns towards the downside, with scope to test the 1.1160 region. A break below this last, exposes the pair to a decline down to 1.1120 a strong static support level.
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