EUR/USD - Bulls in control ahead of the ECB

Recent price action indicates the EUR could re-test the yearly highs above 1.25.
Focus on ECB's language on the ECB.

Omkar Godbole FXStreet Contributor

The EUR's move above the double top neckline of 1.2201 on Mar. 1 trapped bears on the wrong side of the market. In the subsequent days, the common currency extended gains and rose to a high of 1.2446 (yesterday) as fears of trade war saw investors ditch the greenback in favor of the currency backed by hefty current account surplus.

As of writing, the EUR/USD pair is holding just above 1.2402 - 61.8 percent Fibonacci retracement of Feb. 16 high - Mar. 1 low.

The one-month 25 delta risk reversals turned positive earlier this week, indicating the implied volatility premium for EUR calls is higher than the implied volatility premium for the EUR puts, i.e. the move from 1.2154 to 1.2446 has revived demand for the bullish bets (calls).

Further, the momentum studies - 5-day moving average (DMA), 10DMA, and 50DMA are on the rise, indicating a bullish setup. So, it appears the EUR is all set to re-test the yearly high of 1.2556 set on Feb. 16.

That said, the ECB language on QE could either accelerate or slow down the EUR's ascent towards 1.2556. Kathy Lien from BK Asset Management says, "the ECB is widely expected to leave monetary policy unchanged and the only question is how quickly they will start talking about unwinding Quantitative Easing and raising interest rates."

The December policy statement had said a review of policy language may be warranted in early 2018. So, if the language remains unchanged, the EUR could depreciate somewhat, however, investors would then start pricing-in a change in April. So, the drop will likely be short-lived.

EUR/USD Technical Levels

A move above 1.2446 (previous day's high) would allow a stronger rise towards 1.2538 (Jan. 25 high) and 1.2556 (Feb. 16 high). On the downside, failure to hold above 1.2385 (support on 1-hour chart) could yield a sell-off to 1.2355 (1-hour 100-MA) and 1.2328 (Mar. 6 low support on 1-hour chart).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bullish	Neutral	Expanding
1H	Bearish	Neutral	Low
4H		Neutral	Shrinking
1D	Bullish	Neutral	Low
1W	Bearish	Neutral	High
Updated Mar 8, 03:45 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

USD/JPY consolidates near 160.50 intervention zone ahead of FOMC decision

USD/JPY remains close to the 160.50 intervention zone during the Asian session on Wednesday. Despite the BoJ's rate hike to its highest level since 1995, Japan's borrowing costs remain significantly lower than those of peer nations such as the US. Moreover, the BoJ's more cautious stance on bonds undermines the Japanese Yen and supports the currency pair. Meanwhile, the US Dollar remains on the back foot amid the optimism over the US-Iran peace deal and ahead of the Fed policy decision, capping spot prices.

AUD/USD holds steady above 0.7050; looks to Fed decision for fresh impetus

AUD/USD is seen consolidating above mid-0.7000s during the Asian session as traders await the outcome of a two-day FOMC meeting later this Wednesday. In the meantime, the optimism over an interim peace deal between the US and Iran keeps the US Dollar bulls on the defensive. This, along with the RBA's hawkish pause on Tuesday, acts as a tailwind for the currency pair.

Gold remains below 200-SMA as traders await FOMC rate decision

Gold preserves weekly gains registered over the past two days, though it remains below a technically significant 200-day SMA through the Asian session on Wednesday. Traders now seem hesitant and are keenly awaiting the highly anticipated Fed rate decision before placing fresh directional bets. In the meantime, the US-Iran interim peace agreement keeps the US Dollar bulls on the defensive, which might continue to act as a tailwind for the bullion.

Coinbase outlines 'Everything Exchange' vision with planned tokenized stocks and AI advisor

Crypto exchange Coinbase unveiled a broad slate of new products on Tuesday, outlining plans to expand into tokenized equities and AI-powered investment tools in its pursuit of becoming an "Everything Exchange." A centerpiece of the roadmap is Coinbase's planned launch of tokenized US equities for customers outside the United States.

1% rate, 160 Yen: Why Japan’s historic hike changed little

The Bank of Japan (BoJ) pushed its short-term policy rate to 1% on Tuesday, the highest setting since 1995 and a 31-year milestone in a normalization cycle barely two years old. It is the kind of number that should mark a turning point for the Yen, and it did almost nothing.

Why a hawkish RBA is no longer enough to lift the Australian Dollar

The Reserve Bank of Australia delivered more than what markets expected: a hawkish hold that should have supported the Aussie. But markets widely ignored it, focusing instead on slowing economic growth and proving that central bank messaging alone isn’t always enough to drive currencies.