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  • EUR/USD rebounds to the 1.1270 region post-ECB decision.
  • The ECB now sees GDP in the region contracting 8.7% in 2020.
  • Lagarde expects the economic activity to rebound in Q3.

The single currency has regained the smile following the ECB event and pushed EUR/USD to the 1.1270 region, just to recede a tad afterwards.

EUR/USD remains firm on ECB

EUR/USD is therefore extending its upside momentum for an extra session on Thursday after the ECB left no room for surprises at its meeting. In fact, the central bank left its benchmark rates unchanged at increased its PEPP by €600 billion.

At her press conference, Chief C.Lagarde stressed that the Council did not discuss purchasing junk corporate bonds under its current programme, adding that there was broad consensus regarding the increase to the PEPP.

Additionally, the ECB revised its forecasts for GDP and inflation in Euroland and now sees the economy to contract 8.7% this year and to expand 5.2% in 2021 and 3.3% in 2022. When comes to inflation, consumer prices are now expected to rise 0.3% this year, 0.8% and 1.3% in 2021 and 2022, respectively.

What to look for around EUR

EUR/USD has move above 1.1250 earlier in the week against the backdrop of the solid mood in the risk universe. As usual, the weakness in the dollar and the positive prospects following the gradual re-opening of economies around the world keep underpinning the investors’ preference for riskier assets. In addition, Germany is planning to pump an extra €100 billion into its economy, which adds to the recently proposed €750 billion aid packaged by the European Commission (EC). Further support for the euro lies as well in the solid position of the region’s current account.

EUR/USD levels to watch

At the moment, the pair is gaining 0.17% at 1.1251 and a breakout of 1.1272 (weekly/monthly high Jun.4) would target 1.1391 (monthly high Jun.13 2019) en route to 1.1412 (monthly high Jun.25 2019). On the flip side, immediate contention emerges at 1.1012 (200-day SMA) followed by 1.0912 (55-day SMA) and finally 1.0870 (weekly low May 26).