Will ECB Review Its QE Program on Thursday? EUR/USD Forecasts

The single currency slipped to a 5-day low against the greenback as investors eye the ECB policy meeting tomorrow. The central bank currently has their interest rate at zero and its deposit rate at -0.4% in an effort to stimulate the economy further to the running bond-buying program. We don’t expect changes to the current monetary policy, however, during the press conference of the ECB President Mario Draghi, traders will hang on every word to get hints if the policymakers plan to review the economy after the recent upbeat inflation surprise. Eurozone’s inflation rate picked up above ECB’s just below 2% target, in February, which may force the central bank to slow down the stimulus measures to avoid battling with a higher than desired inflation in the near future.

Mr. Draghi will probably continue to keep a dovish tone and will mention that the CPI increase is not solid but just temporary, driven by oil prices. Thus, they will not review the economy until the next policy meeting and may not even discuss the possibility to revoke the stimulus measures for now until they have more trustful robust data than the 0.9% core CPI. They may also repeat that they expect the inflation to remain at low levels for the next months. However, ECB must be ready to take measures, in either way, to keep inflation in the target levels. If they don’t mention that they are ready to face any situation, may increase traders’ concerns and put extra pressure on the weak traded euro that is pulled down by politics over the last months.

EUR/USD – Technical Outlook
Euro has been choppy and fairly directionless against the U.S. dollar over the last almost three weeks as it is developing within 1.0500 strong psychological support and 1.0630 resistance barrier. Over the last few hours, the EUR/USD pair slipped below 1.0560 and is moving towards the aforementioned psychological level. In the case of a penetration of the latter level, our expectation is a further decline until the 1.0455 obstacle.

Otherwise, if the euro gains momentum to drive the pair higher, the price will rise again back to 1.0630. Technical indicators are confirming the recent bearish attitude on price, as well as the moving averages on both daily and 4-hour charts. On the daily chart, RSI rebounded on the 50 level and now is approaching the 30 zone. In addition, on the short-term timeframe, the RSI indicator is falling with strong momentum while the MACD oscillator has just entered the negative path and crossed its trigger line to the downside during the previous sessions.


JFD Research