- During yesterday's trading, the struggling euro regained its strength to record a positive daily close against both the dollar and the pound.
- This was after a report indicated the European Central Bank would issue a higher-than-expected inflation report on Thursday that could justify another rate hike.
- However, the gains of the euro currency pair against the US dollar EUR/USD did not exceed the resistance level of 1.0768 and then quickly returned on its downward path, settling around the 1.0730 support while waiting for the European Central Bank's announcement.
According to a Reuters report, the European Central Bank's quarterly forecast will show that inflation will remain above 3% in 2024. The market has read this as a "hard" development because it implies that the European Central Bank may be in a position to raise interest rates by 25 basis points. additional while maintaining his commitment to more interest rates.
This is because market prices showed that investors are in a position to not change interest rates today. Commenting on that, Alvin T. Tan, currency market analyst at RBC Capital Markets, says: "The main news released overnight that the European Central Bank expects inflation in the Eurozone to remain above 3% next year helped the EUR/USD pair move Surprisingly after the sales he witnessed during the day".
For his part, Joseph Caporso, the strategist at the Commonwealth Bank, says that the euro got rid of its previous losses after the Reuters report, but also indicates that the economic growth rating in the eurozone for 2023 and 2024 will also be downgraded.
Analysts from RBC Capital "The news will prepare for the most interesting European Central Bank meeting today, as the market now expects more than an opportunity to raise the interest rate." Anders Ekloff, an analyst at Sweden Bank, says: "The weakness of the euro and the rise in oil prices may push the European Central Bank to raise the interest rate by 25 basis points, which will give the euro a boost (at a price of 10 basis points), if the European Central Bank sticks to its bias emphasis". In the same regard, Dominic Boning, head of European foreign currency research at HSBC, says that the European Central Bank meeting today Thursday has the potential to create some volatility for the euro.
Expectations of the euro against the dollar today:
- Yesterday's recovery kept the EUR/USD pair above the 100-hour moving average.
- As a result, the pair continues to trade within the normal trading area for the RSI on the 14-hour frame.
- In the near term, according to the performance on the hourly chart, it seems that the EUR/USD currency pair has recently completed an upward breakthrough from the formation of the descending channel.
- The MACD indicator also seems to lack bearish momentum as it nears the bullish cross.
Therefore, the bulls will target extended rebound profits at around 1.0753 or higher at the 1.0777 resistance. On the other hand, the bearish speculators will look to pounce on pullbacks around 1.0710 or lower at the 1.0680 support.
In the long term and according to the performance on the daily chart, it seems that the EUR/USD currency pair is trading within a downward channel. However, the daily MACD appears to be about to initiate a bullish crossover, indicating a possible pullback. Therefore, the bulls will target long-term profits at around 1.0841 or higher at the 1.0935 resistance. On the other hand, the bearish speculators will look to take profits at around 1.0643 or below at the 1.0547 support.
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