EUR/USD Rebounded on the 5-Month High Ahead of ECB Meeting

Confidence in the single currency weakened ahead of Thursday’s European Central Bank (ECB) following the aggressive run after the first round of the France presidential elections on Sunday. Since it jumped higher on the market-friendly result, with Emmanuel Macron and Marine Le Pen continue to the second round, the euro opened on Sunday’s trading period with an upside gap.

Traders await the next significant event – ECB meeting - that may have an impact on the market. The surprise is that a tightening of monetary policy should mean a steady euro. The central bank will probably keep the interest rates at 0% and the deposit rate at -0.4%, however, the main focus will be to gauge the sentiment of policymakers. After many years, Eurozone’s inflation rate is close bank to ECB’s 2% target which may alarm the policymakers to revise the current strong stimulus measures. A while after the interest rates announcement, ECB President Mario Draghi will give a press conference that will be closely watched.


EUR/USD – Technical Outlook
The euro edged higher versus the U.S. dollar over yesterday’s session and posted a new five-month high at 1.0950 resistance level. The EUR/USD pair failed to recover the gap that created after the French elections while the price now is moving lower approaching again the 50-weekly SMA, near 1.0890. We could see a strength in U.S. dollar due to Donald Trump’s impending tax announcement today if the traders like what they hear. So, a retracement is possible until the 1.0870 support level.

An alternative scenario, if there is a run above the 1.0950 resistance level the price will open the way for the next resistance level at 1.1140. The price needs to climb above the 200-weekly SMA which is near to 1.1000 psychological level before run away. The RSI indicator failed to enter the overbought path however, the MACD oscillator is strengthening in the positive territory.