EURUSD Consolidates Above 1.17 on ECB QE Exit Talk

The EUR/USD closed above 1.17 yesterday on news the European Central Bank (ECB) will debate QE exit at next week’s meeting in Latvia. The uptick in EURO’s favor was also influenced by support gained from Italy PM Conte commenting that his country has no plans to leave the Euro. As of writing, the pair is trading at 1.1715. The corrective rally from the low of 1.1510 could be extended further as the ECB QE exit talk and Italy relief seems to have triggered an unwinding of EUR bearish bets (hedges) initiated last week.  This news on QE program closing was announced by Bloomberg which cited sources that ECB’s is expected to make public announcement of same during its policy meet to be held later this month. During his speech Italian PM Conte also mentioned his plans on new government’s tax cuts and higher welfare spending plan lifted Italian bond yields which also added bullish support to EURO. The market will start to focus on the ECB from now on. Politics in Italy and Spain will play second fiddle as we now have new governments in both countries.

EURUSD Moves Higher

In the week ahead, the U.S. dollar stands to continue correcting lower. EUR/USD has held above a weekly horizontal level found at 1.1616. The level reflects the 2016 high and had held a brief decline that followed Friday’s jobs report. Range resistance at 1.17140 comes from a confluence of a horizontal level as well as a Fibonacci retracement. The horizontal level is significant, as it held the pair higher on several declines in the second half of 2017.

The 20-day moving average currently resides near 1.1750 and provides further resistance slightly above the confluence area. On release front US calendar has a positive outcome for both ISM Non-Manufacturing PMI & Services PMI while JOLTs Jobs Opening data also had a positive outcome. European Calendar had a mixed outcome on macro calendar but it didn’t have much impact on pair as investors chose to focus on Policy meet related news and European political climate which had helped the pair consolidate above 1.17 price handle. Expected support and resistance for the pair are at 1.1685 / 1.1645 and 1.1743 / 1.1775 respectively.