EUR/USD Price Forecast – EUR/USD To Continue Subdued Price Action For Rest of The Day

EURUSD is on the path for steady recovery post sharp declines suffered yesterday. The common currency saw two-way price action following European Central bank’s Monetary Policy Update and Press Conference yesterday, which to sharp declines resulting in the pair falling below 1.13 handle and hitting 5-week lows at 1.1289 marks. The ECB update saw interest rate remain unchanged but forward guidance mentioned that while rate hike plan for 2019 is still on the table, they are going to wait and see market movement until March before making any important decision suggesting that interest rate is likely to remain unchanged across summer of 2019. During his speech at press conference post MPC update, ECB President Mario Draghi mentioned that euro-area economy is set to suffer further owing to volatile financial market influenced by geopolitical events, protectionism, vulnerabilities in emerging markets as the reason.

Broad-Based USD Price Dynamics To Dictate Short Term Price Action

Further news that the German government has lowered its GDP forecast for 2019 to 1% from 1.8% owing to impact of slowdown in the global economy in German markets and Brexit proceedings also added to bearish investor sentiment. However, the fact that both Democrats and Republicans failed to get their proposals approved in Senate meeting last night and the partial government shutdown is likely to extend to 6^th week, helped limit EURO’s loss. As of writing this article, EURUSD pair is trading at 1.1321 up by 0.15% on the day, having managed to recover ground above 1.30 handle during early Asian market hours. Given clear lack of fundamental support for EURO bulls, any positive price action in favor of common currency is likely to a result of broad-based weaker Greenback. This suggests that EURO’s gains could be limited in medium to long term as EURO is unlikely to retain gains despite positive rally.

On release front today, European calendar will see the release of German IFO business climate index data and German current assessment/business expectations data which are forecast to see a decline compared to previous readings while U.S. Calendar will see release of Core durable goods order and new home sales data with a mixed forecast. Macro data outcome is likely to keep volatility high on last trading session of the week but the chance for downside move is higher given dovish German data forecast. A breach below 1.1300 handle today is likely to result in further declines as trading closes for the week, while steady price action could see the pair aim for 1.1350 handle. Given clear lack of trigger that favors a EURO, any short term gains are likely to remain the result of broad-based USD price dynamics.