EUR/USD: Bears may be losing steam ahead of ECB

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  • The EUR/USD pair created a long-tailed candle yesterday, signaling bear exhaustion.
  • The markets have likely priced in dovish ECB. Expectations of the first ECB rate hike have been pushed out to mid-2020.

The EUR/USD pair witnessed two-way business yesterday before ending largely unchanged on the day at 1.1359. 

The long lower shadow attached to yesterday’s candle represents bearish exhaustion. Validating that argument is the bullish divergence of the relative strength index (RSI) on the hourly and 4-hour chart. 

It is worth noting that EUR/USD topped out at 1.1570 on Jan. 10 – two days after investors pushed back expectations for the first ECB rate hike into the middle of 2020. Notably, the currency pair has shed more than 200 pips in the last two weeks. 

Put simply, markets may be done pricing the possibility of the European Central Bank (ECB) turning dovish at the rate decision, scheduled for Thursday.

As a result, the currency pair may trade sideways-to-positive ahead of tomorrow’s ECB rate decision. As of writing, it is trading at 1.1367. 

The difference between the overnight and forward Eonia interest rates — bank-to-bank interest rates for the eurozone, which provide some indication of how investors view the ECB rate trajectory — imply a 10-basis-point rate hike is now only fully priced in around the middle of 2020, according to Reuters. Other money market futures, such as Euribor, point to a move even later in 2020.

EUR/USD Technical Levels

EUR/USD

Overview:
    Today Last Price: 1.1366
    Today Daily change: 0.0014 pips
    Today Daily change %: 0.12%
    Today Daily Open: 1.1352
Trends:
    Daily SMA20: 1.1425
    Daily SMA50: 1.139
    Daily SMA100: 1.1458
    Daily SMA200: 1.1594
Levels:
    Previous Daily High: 1.1382
    Previous Daily Low: 1.1336
    Previous Weekly High: 1.1491
    Previous Weekly Low: 1.1353
    Previous Monthly High: 1.1486
    Previous Monthly Low: 1.1269
    Daily Fibonacci 38.2%: 1.1353
    Daily Fibonacci 61.8%: 1.1364
    Daily Pivot Point S1: 1.1332
    Daily Pivot Point S2: 1.1311
    Daily Pivot Point S3: 1.1286
    Daily Pivot Point R1: 1.1377
    Daily Pivot Point R2: 1.1402
    Daily Pivot Point R3: 1.1423

 

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