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  • EUR/USD is lacking a clear directional bias ahead of Thursday’s ECB rate decision.  
  • Goldman Sachs expects the EUR to rise on potential ECB disappointment.  

EUR/USD continues to trade in a sideways manner ahead of the all-important European Central Bank rate decision, scheduled at 11:45 UTC on Thursday.

The currency pair is currently trading at 1.1050, representing marginal losses on the day. The bounce from the Sept. 3 low of 1.0926 ran out of steam at highs above 1.1080 on Sept. 5.

On that day, the pair created a Doji’s candle, indicating indecision in the market place and since then the pair has been restricted well within the range of 1.1085-1.1017 (Doji’s high and low).

Focus on the ECB

The European Central Bank is expected to dole out additional stimulus on Thursday in the form of a rate cut. The markets are full-priced in for a ten basis point rate cut in the deposit rate to -0.5% from the current -0.4%.

The central bank is also expected to restart the quantitative easing program from October and announce the same on Thursday.

Analysts at Goldman Sachs believe the ECB’s stimulus package could disappoint in terms of its size, its timing or even whether it happens at all. That could yield a sharp rise in the common currency.

“We are no longer confident that an outcome in line with our view will drive the euro lower against the dollar over the near term,” Goldman Sachs analysts have reportedly said.

Narrowing price range

The pair is trapped in a narrowing price range on the 4-hour chart. A break above 1.1056 would confirm range breakout and  open the doors to re-test of 1.1085 (Sept. 5 high). A range breakdown could invite selling pressure, possibly yielding a retest of levels below 1.10.

Technical levels