The EURUSD pair is extending its bullish run, headed toward the fifth daily gain in a row. The price faced local resistance around 1.2450 and has moved off highs slightly, while keeping the upside bias. The current euro’s strength is mostly due to the persistently negative dynamics in the greenback across the board. Meanwhile, the ECB meeting is due tomorrow, and euro bulls hope the currency will find additional support from the central bank’s statement. Many traders expect the European regulator to drop its so-called “easing bias” and signal the coming “hawkish” shift in the monetary policy, which could be perceived as the first step towards policy normalization. Such assumptions are based on the minutes from the last meeting that showed the ECB could announce changes to monetary policy in “early” 2018. Should this happen, EURUSD will get a significant bullish impetus and rise back above the 1.25 threshold.
However, there is a risk for this scenario as the central bank also mentioned in the minutes that the euro exchange rate was a source of uncertainty. Considering the currency remains strong and continues to trade close to its three-year highs, Draghi may opt to be patient and keep the cautious approach, which will be a disappointment for the bulls. But even so, the potential downside pressure on the pair will likely be limited as the greenback remains under a significant pressure.
By Helen Rush
Senior Analyst at Capital Markets