EURUSD volatility expected to increase as ECB decision looms


EURUSD has recently traded in relatively narrow ranges despite major economic data releases. The pair found strong support at the 1.16 level as buyers intervened with every move below. However, the rebounds were shallow and with little to no following.

This week, price action on EURUSD is expected to rise significantly as investors prepare for two crucial events that will impact the currency pair: the European Central Bank meeting and the Federal Reserve meeting of United States (FED) next week.

The Fed officially announces the tapering

The Fed is expected to officially announce the reduction in its asset purchases at next week’s meeting. Last Friday, the Fed chairman said he believed the time to cut had come, but the EURUSD did not respond, possibly because the news came late on a Friday afternoon.

The statement is clearly hawkish for the dollar, and it should weigh on EURUSD, especially as the ECB considers a reverse strategy. It won’t shrink yet; thus, the two monetary policies diverge.

EURUSD is the most popular currency pair on the FX dashboard and the one that sets the course for the dollar index. Despite finding buyers below 1.16 in recent weeks, the bias remains bearish as the two central bank meetings approach.

On Thursday, the focus is on the ECB’s press conference and its staff’s economic projections. As always, projections of inflation expectations are essential for the euro. On Friday, investors will start to prepare for the Fed meeting scheduled for next week, and if the ECB maintains its conciliatory bias, there’s a good chance the EURUSD will test its recent lows around the 1.15 level. .



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