EUR/USD traders on high alert into the ECB this week

EUR/USD is trading in a tight range ahead of the Tokyo open near to 1.1610. EUR/USD fell from 1.1645 to 1.1610 overnight and remains capped by the 4-hour 10/20 EMA bearish crossover. The downside came from the dollar steadying on Monday afternoon after bouncing off a one-month low. Traders now look ahead to key data events for the week ahead, including the European Central Bank meeting this Thursday.

The forex space is being governed by markets that are weighing the prospects of higher interest rates for different currencies. This makes this weeks calendar critical as it may set the stage for many weeks to come. So far, the rebound in the greenback has come at the expense of the euro, the Japanese yen and the Swiss franc in the main. 

ECB in focus

For today, bar the Aussie inflation readings, will be a quieter day for economics whereby we will see markets focused on US New Home Sales and a speech by the ECB's Villeroy on Tuesday.  The bigger event, however, will be the ECB that meets this week and comments from the bank could shift views on how many inflationary pressures could impact interest rates.

''Whilst it has signalled that December is the meeting to expect a comprehensive update on post-PEPP plans, the current rise in inflation demands attention,'' analysts at ANZ Bank argued. ''Our analysis estimates inflation will prove more persistent than transitory next year, though we also think that the ECB will push back against expectations of rates rises in 2022.''