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  • EUR/USD is flatlined above 1.18 at press time, having declined by 0.20% on Monday. 
  • Euro bulls may sit on the fence ahead of Thursday’s ECB rate decision. 
  • The central bank may express concerns regarding Euro’s recent strength. 

EUR/USD may trade in a sideways to negative manner on Tuesday on dovish European Central Bank (ECB) expectations and renewed Brexit tensions. 

ECB to talk down Euro

While the ECB is expected to remain on hold on Thursday, the central bank may express concern regarding EUR’s recent strength and its deflationary impact.

Last week, the central bank’s Chief Economist Philip Lane said that the exchange rate matters for monetary policy. EUR/USD has rallied by over 5% this quarter alone and recently hit a multi-year high above 1.20.

Renewed concerns regarding Britain’s divorce deal with the European Union could also keep the bulls at bay. On Monday, media outlets reported that UK’s Prime Minister Boris Johnson was planning legislation to modify parts of the Brexit deal signed in January. The European Union responded by warning that there would be no trade deal if the UK unilaterally tinkers with the divorce treaty. 

On the data front, the focus on Tuesday would be on the German Trade Balance (July) and the Eurozone Employment Change and second-quarter gross domestic product. 

Technical levels