EUR/USD Price Forecast – Consolidative Action Near Overnight Lows To Continue Ahead of ECB MPC Update

The EURUSD pair yesterday saw a bearish breakout in American market hours as upbeat US macro data underpinned US Dollar’s positive price action in the broad market. Despite Wall Street continuing to see some level of bearish price action, US Greenback remained unaffected as last night’s ISM Non-manufacturing PMI & New Home Sales data were way better than expected and this was interpreted as a sign of strong positive activity in the American economy. This led to the pair seeing a decline below 1.1300 handle and USD bulls were further supported by a weaker Euro in the broad market which has been suffering owing to dovish fundamentals.

Brexit Talks In Focus Following Overnight Decline

The sentiment surrounding Euro has taken a dovish turn as recent economic data and lack proceedings in Brexit front suggest that Euro may be facing significant levels of economic slowdown. This has led analysts to believe that ECB may hint at delaying plans for rate hike plans of 2019 further than expected despite various members clearly mentioning that MPC is going to observe market activity till summer owing to geopolitical events providing mixed signals before taking any major decisions in rate hike front. Further, expectations that ECB could begin implementing its TLTRO plans in the near future also offset EURO bulls in the broad market. However, these are currently at speculative levels only as investors and analysts are on the lookout for tomorrow’s ECB interest rate decision update and press conference for forward guidance which will provide some level of directional cues. This has helped limit Euro’s declines well above 1.1275 handle in Pacific-Asian market hours.

As of writing this article, the pair is trading in a consolidative manner above 1.1290 handle at 1.1296 down by 0.09% on the day. Investors are now focused on EU-UK Brexit talks set to resume in European market hours today as proceedings have currently come to a standstill. While there was a three-hour long meeting yesterday it ended with both parties unable to reach any sort of agreement. In case, the talks today fail to generate any momentum similar to yesterday Brexit woes are likely to push EURUSD towards mid-1.12 handle ahead of US market hours. Moving forward, the pair is likely to continue rangebound price action as investors are unlikely to place major bets ahead of tomorrow’s ECB meeting awaiting directional cues. Headlines pertaining to EU-UK Brexit talks & US ADP Non-Farm Employment change updates are expected to provide some level of volatility and short term profit opportunities in trading session the day ahead. Expected support and resistance for the pair are at 1.1278/75, 1.1250, 1.1235 and 1.1300, 1.1330/35, 1.1375 respectively.

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