EUR/USD Daily Price Forecast – EUR/USD Consolidates As US Greenback Gains Strength Owing to Trade War Woes

The Euro stands at the back foot in early Wednesday’s trading, however the downside move is limited indicating consolidative price action. The Euro US Dollar (EUR/USD) exchange rate appears to be in a holding pattern this morning in the run up to the European Central Bank’s (ECB) policy decision on Thursday. As of writing this article, the pair is trading flat at 1.1595 down 0.09% on the day. The pair is expected to continue range bound price action as investors await the conclusion of the ECB’s latest policy meeting tomorrow. While no policy changes are expected from the bank this month, EUR investors will be eager to get their hands on the ECB’s latest macroeconomic forecasts. This could see the Euro tick lower tomorrow if the ECB revises its growth forecasts downwards as some analysts predict.

ECB’s Policy Meet Update Could Decide Short Term Momentum of The Pair

However it may be ECB President Mario Draghi’s accompanying message that comes under the closest scrutiny on Thursday as investors look for any hints on whether the next ECB rate hike can be expected at the very end of 2019 or possibly a little earlier. This could see the Euro shoot higher if Draghi appears to tip the scales in favor of those economists who forecast that the bank could raise interest rates next September. The escalation of trade jitters with US and China in center stage and its potential effects on the EM FX has returned to the fore on Wednesday and is currently sustaining the risk-off sentiment, undermining any bullish attempts in spot at the same time. In the meantime, the pair is extending the sideline theme seen since the start of September, with gains capped around 1.1660 and the 1.1500 neighborhood managing well to offer decent contention for the time being.

As mentioned, the trade-factor continues to prevail when comes to determine the price action, while easing concerns over Italy and its budget has somewhat mitigated the downside pressure so far. Macro data for euro zone for the day was dovish resulting in pair consolidating below 1.16 handle in mid-European market hours. This is to be followed by US Producer Prices during August and speeches by FOMC’s Bullard and Brainard, all preceding the release of the Fed’s Beige Book. While situational indicators suggest that a break below 1.1508 could push the pair on bear’s path, the current movement is viewed as part of consolidation phase that could last for another couple more weeks. In other words, we do not expect EUR to embark on a sustained directional move anytime soon.