EUR/USD Daily Forecast – Euro Lingers Ahead of ECB as Equities Plunge

The ECB will meet later today and the markets will want to see the central bank take action to combat the negative impacts of the Coronavirus.

Earlier this week, the Bank of England cut rates by half a percent and implemented several schemes to ensure that capital gets into the hands of the people that need it during this time. The UK also announced fiscal measures through its budget which entails 30 billion pounds worth of fiscal easing.

The ECB is not in a good position to act and understandably is not likely to match the efforts of other central banks around the world. But that hasn’t stopped ECB President Lagarde who has been urging government officials in Europe to step up and assists by easing fiscal policy. The meeting today should reveal if Lagarde has been successful in her efforts.

The markets are pricing in 10 basis points of cuts at today’s meeting. The rate cut alone is not likely to have much of an impact. The ECB is also likely to increase its asset purchases and may introduce new QE measures.

It seems almost impossible for Lagarde to over-deliver, but it looks like that is what the markets need. At the time of writing, the German DAX had declined over 5% to trade at lows not seen since the summer of 2016. The Euro Stoxx 50 index was down more than 5% as well and is on the verge of breaking to lows not seen since 2013.

Technical Analysis

After a sharp push higher in EUR/USD at the start of the week, the pair has decisively turned lower, and trades in the red for the week thus far.

Support at 1.1225 is likely to come into play in the session ahead and the level might be important in assessing a directional bias. Further support is found at 1.1186, and a drop below it might suggest a trend reversal.

To the upside, resistance for the session ahead is found at 1.1370.

Bottom Line

• EUR/USD volatility has slowed notably as investors await to hear from the ECB on how they plan to combat the Coronavirus.
• The pair trades near major support, a drop through 1.1186 might suggest a trend reversal.