Bullish case
- Buy the EUR/USD because of the EMA crossover.
- Have a take-profit at yesterday’s high of 1.2158.
- Add a stop loss at 1.2100.
Bearish case
- Place a sell stop order at 1.2100.
- Add a take-profit at 1.2070; the overnight low.
- Set a stop-loss at 1.2130.
The EUR/USD is holding steady ahead of the first European Central Bank (ECB) interest rate decision of the year. It has risen from yesterday’s low of 1.2076 to the current 1.2130.
ECB Interest Rate Decision
The ECB will conclude its monetary policy meeting today and deliver the interest rate decision. Economists expect that the bank will follow its Canadian and Japanese counterparts and leave the current policy unchanged. This means that it will leave the deposit rate unchanged at -0.50% and the target of quantitative easing at 1.35 trillion euros.
The bank will also leave its other policies unchanged as it tries to support the European economy. Still, economists will want to learn more about the bank’s recent decision to control government borrowing costs in a way that resembles the Japanese yield curve control.
The decision comes at a time when the European economy is going through a difficult time as a new strain of coronavirus continues to spread. This has led to relatively weak economic numbers from the region.
Yesterday, the EUR/USD was muted after the Eurostat published mild inflation numbers. In total, the headline consumer price index rose by 0.3% on a month-on-month basis and fell by 0.3% on a YoY basis. The core CPI also rose by an annualised rate of 0.2%, which is below the ECB’s target of 2%.
Meanwhile, the EUR/USD will also react to the economic numbers from the United States. The Bureau of Labour Statistics (BLS) will publish the initial jobless claims data in the afternoon session.
Economists see the number of initial claims falling from the previous 965,000 to 910,000. Also, they expect the continuing jobless claims to rise from 5.2 million to 5.4 million. These numbers will bring more urgency to the new Biden administration to provide more stimulus.
Other important numbers from the US will be the housing starts, building permits, and the Philadelphia Fed manufacturing index.
EUR/USD technical outlook
On the hourly chart, the EUR/USD pair has bounced back after falling yesterday. It has moved back above the 23.6% Fibonacci retracement level on the hourly chart. The pair has also moved above the 15-period and 25-period exponential moving averages while the two lines of the MACD indicator have formed a bullish crossover.
Therefore, the pair will likely continue rising as bulls target yesterday’s high at 1.2158. It is also at the 38.2% retracement level. This thesis will be invalidated if the price falls below 1.2100.
