Both the upcoming ECB meeting and Christine Lagarde's speech is keeping the European currency in suspense. According to analysts, the euro is consolidating before the ECB meeting. The market is not expecting a rise in the interest rate from the regulator, but Lagarde's hints about a possible change in monetary policy are enough for the currency to enter a peak.
The current market sentiment is gradually turning in favor of the euro. According to experts, the single currency may collapse in the near future if it does not receive support from the regulator. The single currency was helped by the impressive data on the level of economic sentiment from the German ZEW Institute. For the first month of 2020, the index of economic conditions in Germany amounted to minus 9.5 points, against the previous minus 19.9 points, and the index of economic sentiment amounted to 26.7 points, more than double the previous value of 10.7 points. Experts recorded a rise in the index of economic sentiment in the entire Eurozone by 25.6 points, which is much higher than the previous figure of 11.2 points.
Analysts forecasted that on Wednesday, January 22, sellers and buyers in the EUR/USD pair will fight for the support zone levels within the range of 1.1075–1.1085, since a day earlier, on Tuesday, the EUR/USD pair already passed this way, cruising near the 1.1086–1.1.1087 marks.
Later on, the tandem moved to conquer the peaks, reaching the level of 1.1093. However, it could not hold these positions for a long time.
The morning of Wednesday, January 22, was marked by a rollback of the EUR/USD pair to 1.1085. For a long time, the classic tandem cruised in the range adjacent to this mark.
However, later on, the EUR/USD pair lost its footing, and the ground from under the tandem's feet left quickly. It collapsed to a critical 1.1077, trying to find the bottom. These attempts lasted with varying success.
Analysts believe that by the middle of this week, on the eve of the ECB meeting, the EUR/USD pair will pass through the crucible of correction and may enter a downward spiral. They are confident that the downward trend of the tandem has all the prerequisites, both fundamental and macroeconomic.
The Euro zone's strained economic background is contributing to the downward sentiment of the European currency. According to experts, in the near future, Lagarde may revise and radically change the current strategy of the ECB, which the monetary authorities have been following for the last 17 years. If this scenario is implemented, the review process will take about a year, resulting to many landmarks being changed or adjusted in accordance with the new realities. Although many experts are skeptical about revising the strategy, they understand the need for it, as there is a huge possibility that this will help revive the inflation, which over the past 10 years, has not been able to accelerate, despite quantitative easing measures and a policy of extremely low rates. At the same time, analysts do not expect any changes in the ECB's monetary policy particularly on the reduction of interest rates.
According to experts' calculations, the euro may lose its position in the near future. It will depend heavily on the upcoming ECB meeting. Despite that, experts still expect that even in a negative scenario, the curency will still be able to quickly recover, without much damage, and overcome the economic and geopolitical obstacles.
