- EUR/USD looks heavy with the weekly candle showing buyer exhaustion.
- ECB's Lagarde is unlikely to talk dovish in her first major policy speech.
- The focus is also on the preliminary Eurozone and Germany PMI numbers.
EUR/USD is looking heavy as per technical studies and may drop sharply if the new European Central Bank President Christine Lagarde sounds dovish in her first policy speech.
The pair is currently trading at 1.1063, representing a 0.12% gain on a week-to-date basis, having hit a high of 1.1097 on Thursday. The long upper wick attached to the weekly candle indicates buyer exhaustion. Therefore, the pair appears on track to pierce support at 1.1052. That will likely invite stronger selling pressure, as discussed in the Asian session.
Lagarde speech due at 08:30 GMT
The new ECB President will be delivering her first big policy speech at a banking conference in Frankfurt, having refrained from commenting on the monetary policy during her Nov. 4 speech in Berlin.
Dovish comments will likely drive EUR/USD to 1.10, according to Kathy Lien, Managing Director Of FX Strategy For BK Asset Management. The EUR will likely invalidate the immediate bearish set up with a convincing move above 1.11 if Lagarde sounds optimistic about the economy and calls for more effort on the fiscal front.
Recent reports have a very deep and wide rift within the ECB. Many board members had opposed former President Draghi's decision to announce a fresh stimulus in September. Therefore, Lagarde has little room to raise hopes for more stimulus. Further, Germany avoided recession in the third quarter.
All-in-all, the probability of Lagarde sounding neutral-to-hawkish is high. The resulting gains in the EUR, however, could be erased if the preliminary Eurozone and German PMI, scheduled for release after Lagarde's speech, disappoint expectations. The final reading for Germany's third-quarter GDP, due at 07:00 GMT, is unlikely to move the pair.
Technical levels
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