EUR/USD: Upside still capped below 1.1150 ahead of ECB

The bulls take a breather heading into the European opening bells, allowing a tight consolidative mode in EUR/USD below the key 200-DMA at 1.1155, as the focus remains on the European Central Bank (ECB) monetary policy decision for a fresh direction.   

Lagarde’s debut to disappoint the hawks?

The spot reports small gains in early Europe, remaining close to the five-week tops of 1.1145, retested in the Asian trades. The greenback continues to nurse Wednesday’s dovish US Federal Reserve bank’s (Fed) event induced losses across its main competitors, collaborating to the buoyant tone seen around EUR/USD.

However, the further upside appears limited, as markets refrain from placing any directional bets ahead of the key ECB rate decision and Lagarde’s presser. According to Yohay Elam, FXStreet’s Senior Analyst,” While the ECB is unlikely to change its policy in its last event for 2019, Christine Lagarde's first decision may cause high volatility in EUR/USD.”

“Upbeat figures and forecasts, as well as an attempt to appease the dissatisfied hawks, may push the euro higher. In the case of a balanced approach, the general trend will probably remain unchanged. And a surprisingly dovish stance may send the euro down”, Yohay adds.

On Wednesday, the US dollar was heavily dumped across the board after the Fed Chair Powell delivered dovish comments, citing that "in order for Fed to move rates up, would have to see a significant, persistent move up in inflation. That's my personal view." His remarks suggested that a rate cut is still on the Fed’s radar as we head into 2020. Meanwhile, markets are now pricing in a rate cut by early 2021.

In the day ahead, the ECB decision will offer fresh direction to the main currency pair but the moves may remain limited ahead of the US Dec. 15 tariffs decision.

EUR/USD Technical levels to watch