- Quiet session across financial markets ahead of a busy Wednesday.
- Euro fails to break above 1.1285 and retreats.
The EUR/USD pair pulled back during the Asian session and fell toward 1.1260, after hitting at 1.1283, the highest level in almost two weeks. So far today, the price range has been of 30 pips reflecting a low volatility environment.
A calm day, ahead of EU summit, ECB, US CPI and FOMC minutes
The US dollar dropped across the board during the European session amid some improvement in market sentiment, but then it changed and recovered ground as equity prices turned to the downside. As of writing EUR/USD trades at 1.1263, up marginally for the day, headed toward the highest close since March 25.
A cautious tone appears to dominate as the US-China trade talks continue and amid new threats from US President Trump to impose tariffs on European goods. On Wednesday, the EU summit will take place to discuss Brexit. Also, the European Central Bank will meet. Most analysts expect no change in its policy. Wells Fargo analysts warn that we may get some additional details on the next phase of targeted longer-term refining operations (TLTROs). “Some Eurozone economies like Italy are either in or close to recessions, and core consumer price inflation has been below 1.5% since August 2012. Unless economic conditions improve significantly, we think the first rate hike from the ECB will not occur until at least Q1-2020.”
Also on Wednesday, US CPI data is due and later during the day, the Federal Reserve will release the minutes of its latest meeting. ANZ strategists point out that the minutes of the recent “very dovish FOMC meeting” and the ECB meeting, “are expected to re-emphasise the dovish nature of policy guidance, which has the potential to support both bonds and equities.”
EUR/USD finds resistance at 1.1285, still above 1.1250
The euro continues to move with a bearish bias but the upside has been capped by the 1.1280/85 resistance area, also around the 20-day moving average. A break above would likely send the pair to test 1.1300 and if it continues to rise the key resistance might be located at 1.1325.
Recently the pair consolidated below the 20-hour moving average for the first time in more than 24 hours signaling weakness for the next hours that will likely remain in place as long as it holds under 1.1270. The critical short-term support might be located at 1.1250/55 (Apr 3 high / April 9 low) followed by 1.1235.
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