ECB officials may face a daunting economic outlook today, as tight restrictions and slow-paced vaccinations across the EU threaten to slow economic recovery.
A protracted pandemic, concerns over new strains of COVID, political tensions in Italy, and the high euro exchange rate could be topics for discussion by the Board of Governors.
At the same time, yesterday, data on EU inflation was published, where it was revealed that the rate has continued to decline for the fifth month in a row. The scale of deflation is -0.3%.
Because of this, the ECB will unequivocally pay attention, and it has no choice but to further expand the quantitative easing program, which was already expanded at the very end of last year.
Such a rapid easing of monetary policy may greatly scare investors, which will lead to a weakening of the European currency.
In any case, most economists surveyed by Bloomberg continue to believe that the ECB will not add more stimulus to tackle the pandemic crisis. However, they expect the current emergency bond purchase program to be fully utilized, contrary to what Christine Lagarde has said last December.
What happened on the trading chart?
EUR / USD continues to trade in the direction of the correction from 1.2349, where, taking into account the recent pivot point which is the level of 1.2060, the quote returned to the range of 1.2130 / 1.2170, which was held by market participants last week.
Reaching these levels reduced the volume of long positions in the euro, which positively plays on the chances that the correction will continue.
As for market dynamics, volatility reached 81 points, which is 3% higher than the average level. Speculative activity was high, and it is confirmed by the overall dynamics and trading volumes.
If we look at the daily chart, we will see more closely what happened in EUR / USD: yesterday, the euro jumped sharply by about 1,700 pips. Then, upon reaching the peak, it turned down and started a correction.
Outlook for EUR / USD
If the ECB does not hint any change in the monetary policy, EUR / USD will most likely continue its current direction.
As for technical analysis, traders should monitor the movements around 1.2130 / 1.2170, as those will show in which direction the euro will go next.
In simple words, keeping the price below 1.2100 leads to an increase in the volume of short positions, while holding the price above 1.2180 will lead to an increase in the volume of long positions.
Indicator analysis
The minute and hourly time frames (TF) show a buy signal due to the correction in EUR / USD. Meanwhile, the daily period signals sell because of the scale of the correction from the local high.
Weekly volatility / Volatility measurement: Month; Quarter; Year
Volatility is measured relative to the average daily fluctuations, which are calculated every Month / Quarter / Year.
(The dynamics for today is calculated, all while taking into account the time this article is published)
Volatility is currently at 35 points, which is very low for the market. However, many expect that this will accelerate after the meeting of the ECB.
Key levels
Resistance zones: 1.2130 / 1.2170; 1.2350 **; 1.2450 **; 1.2550 ***; 1.2825.
Support zones: 1.2050 *; 1.2000 ***; 1.1890-1.1900-1.1920 **; 1.1810 *.
* Periodic level
** Range level
*** Psychological level
