EUR/USD: Focus on ECB's take on the exchange rate

EUR/USD has witnessed a bull market pullback ahead of ECB's rate decision.
The central bank is expected to maintain the status quo on interest rates and bond purchases.
The ECB may attempt to talk down the euro, with the economy facing recession risk.

Omkar Godbole FXStreet Contributor

EUR/USD's rally has stalled over the past two weeks, and the pair could suffer deeper losses if the European Central Bank (ECB) expresses displeasure over the single currency's strength on Thursday.

At press time, the currency pair is trading near 1.2130, representing a 0.3% gain on the day. While the pair has pulled back from multi-month highs near 1.2350 observed earlier this month, it is still up at least 500 pips from early November lows near 1.16.

The central bank is widely expected to keep the interest rate and the asset purchase program unchanged, having partly boosted the level of policy accommodation until early 2022 in December.

However, the possibility of the central bank jawboning the currency cannot be ruled out.

The stronger euro got attention from policymakers in December. "Concerns were voiced over risks related to developments in the exchange rate that might have negative consequences for the inflation outlook,” ECB's December revealed said. The minutes also took note of the euro's record nominal effective exchange rate and its disinflationary impact.

Besides, the Eurozone economy is facing the risk of recession due to the worsening coronavirus situation and political tensions in Italy and other nations.

EUR/USD may probe the recent low of 1.2053 if the central bank uses strong words while noting the unwanted effects of the euro's strength. "The strong euro is a problem, but keeping the door open to more asset purchases if there’s further [economic] weakness could in many ways achieve the same goal of easing demand for the currency," BK Asset Management's Kathy Lien noted.

Technical levels

EUR/USD

Overview
Today last price	1.213
Today Daily Change	0.0023
Today Daily Change %	0.19
Today daily open	1.2107

Trends
Daily SMA20	1.2199
Daily SMA50	1.2099
Daily SMA100	1.1935
Daily SMA200	1.1628

Levels
Previous Daily High	1.2158
Previous Daily Low	1.2077
Previous Weekly High	1.2227
Previous Weekly Low	1.2077
Previous Monthly High	1.231
Previous Monthly Low	1.1924
Daily Fibonacci 38.2%	1.2108
Daily Fibonacci 61.8%	1.2127
Daily Pivot Point S1	1.207
Daily Pivot Point S2	1.2033
Daily Pivot Point S3	1.1988
Daily Pivot Point R1	1.2151
Daily Pivot Point R2	1.2196
Daily Pivot Point R3	1.2233

Author

Omkar Godbole

FXStreet Contributor

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

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