The euro finished the week on a negative note, having fallen temporarily below 1.0800 as the European Central Bank left the door open to further easing in March.
In a press conference ECB President, Mario Draghi said Thursday that the ECB will possibly reconsider monetary policy stance at next meeting as downside risks have increased. He added there are “no limits” on how far ECB is prepared to act, raising speculation the bank is laying the ground for further stimulus measures at its next meeting.
Despite the dovish comments from the ECB, euro’s downside seems limited given the predominant risk aversion environment, from which the shared currency has benefited lately as it maintains a strong inverse correlation with equities. That same correlation has prevented the euro to benefit from a weaker US dollar seen by the end of the week.
On the other side of the pond, next week the Federal Reserve will meet for the first time this year after deciding to raise rates in December. The FOMC is expected to keep policy unchanged and to take a cautious stance, given recent developments, with mixed economic data in the US and fears of economic slowdown abroad.
The Fed will have to send a strong signal that, despite global turmoil, it could possibly raise rates one of two meetings in the future to give the US dollar a significant boost.
EUR/USD technical view
View the Live chart of the EUR/USD
The US dollar was poised to end the week higher against the euro thanks to Draghi. However, movements continued to be limited and in ranges, with the euro technical outlook weakening further day by day, but still in consolidation mode from a wider perspective. Not even US data nor the ECB changed the main sideways tone.
EUR/USD points lower, but still remains within key levels
The weekly chart shows the pair maintains a bearish outlook, but so far holding above a key support area around 1.0800, that was tested on Friday. A decisive break below 1.0800 could pave the way for a slide toward 1.0700 first; below this latter, the next strong support is seen at 1.0500/20 ahead of 2015 lows at the 1.0460 area.
The upside remains capped by the 20-week moving average (brown line) and the 1.1000 - 1.1050 zone, where the 100- and 200-day SMAs reinforce the resistance area. Any rally toward that region could be seen as a selling opportunity, but if the euro breaks above 1.1050 and holds, a quick advance to 1.1150 would be expected, with an extension up to 1.1300 - 1.1330 on the cards.
Latest updates on the EUR/USD Forecast
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