10:26, 06 March

Remains Above Support at 1.13 ahead of ECB Meeting

In the last week the EURUSD has slowly but steadily declined from a three week high above 1.14 and returned back to the current key level of 1.13. In the previous few weeks the EURUSD was able to rally back above the key level of 1.13 after having dropped to a three month low below 1.1250. Several weeks ago the EURUSD was sold off after running into resistance at the other key level of 1.15, as it maintains it trading range between 1.13 and 1.15. 
On numerous occasions in the last few months the EURUSD has enjoyed rock solid support from the key 1.13 level and will be looking to do so again should it continue its decline. For the last few months now the EURUSD has been content to trade within a narrow range enjoying support from 1.13 and meeting resistance at the 1.15 level.

It is interesting to note that its recent excursion above 1.15 didn’t last long as it was quickly sold down at those three month highs. The 1.13 level has also become quite significant of late, and even though it has fallen through this level a few times, it was quickly pushed higher through strong buying which will provide some confidence that the 1.13 level will provide strong support should the EURUSD attempt to decline again.

After dropping through the 1.13 level near mid-November, the EURUSD did well to rally higher from its lowest levels in 16 months back up towards 1.15 before easing in the week afterwards. Likewise the 1.15 level has become key of late providing stiff resistance and looming above ready to push prices lower. Towards the end of October the EURUSD did well to surge higher off support at the key 1.13 level after having fallen strongly over the last few weeks from above 1.16. These instances again reinforce how significant the current key levels are.

At their last meeting in January, policymakers at the European Central Bank (ECB) were concerned that slowdown in economic growth might be “deeper and more broad-based” than previously suspected.  The minutes from that meeting highlighted “concerns among members about an increasing impact of trade protections, and an escalation of trade conflicts, on the global outlook over time.”  The environment “appeared to be exacting an increasing toll on the world economy,” they said.  The ECB is now facing growing pressure to address how to protect the euro zone economy from a protracted slowdown.  The upcoming ECB meeting is unlikely to provide big surprises, however the central bank is expected to strike a dovish tone.  Many economists believe the global issues will prompt the ECB to lower growth and inflation forecasts Thursday, however also provide a glimpse of ways of responding to the slowdown.  Expansion in the eurozone slowed sharply in 2018 and is forecast to fall further this year, as trade conflicts, slowing growth in emerging markets, and geopolitical uncertainty take their toll.