EUR/USD Holds On To Gains After ECB-Inspired Volatility
The EUR/USD pair manages to close Thursday with a modest 0.5% gain at the 1.0220 area following a spike to fresh two-week highs as the knee-jerk reaction to the European Central Bank higher-than-expected rate hike announcement.
The ECB decided to raise rates by 50 basis points – a 25 bp move was expected and priced in by markets – and announced a Transmission Protection Instrument (TPI), a new anti-fragmentation tool, aimed at supporting the effective transmission of monetary policy across the euro area.
The EUR/USD initially rallied to a high of 1.0278 but failed to sustain momentum and dropped back to the 1.0150 area with the ECB President Lagarde’s subsequent conference.
At the presser, Lagarde confirmed that the following hikes will remain data-dependent and that the rate normalization path will be approached “step by step, month by month and meeting by meeting,” which seemed to put a stop to the pair’s rally.
Investors now focus on the US Federal Reserve rate decision next Wednesday, as policy divergence may extend the EUR/USD losses.
From a technical perspective, the EUR/USD holds a bearish short-term bias and this week's bullish momentum seems to be coming to an end as the bulls got rejected three times by the 20-day SMA. Repeated failure to take on this hurdle could add pressure on the pair in the upcoming days.
If the EUR/USD breaks decisively the 20-day SMA, currently at 1.0260, it could gain bullish momentum and target next resistances at the 1.0300 and 1.0350 levels.
On the other hand, the next support levels are seen at the 1.0200 psychological mark, followed by the 1.0100 zone and 1.0000 ahead of the cycle low of 0.9952.
The ECB decided to raise rates by 50 basis points – a 25 bp move was expected and priced in by markets – and announced a Transmission Protection Instrument (TPI), a new anti-fragmentation tool, aimed at supporting the effective transmission of monetary policy across the euro area.
The EUR/USD initially rallied to a high of 1.0278 but failed to sustain momentum and dropped back to the 1.0150 area with the ECB President Lagarde’s subsequent conference.
At the presser, Lagarde confirmed that the following hikes will remain data-dependent and that the rate normalization path will be approached “step by step, month by month and meeting by meeting,” which seemed to put a stop to the pair’s rally.
Investors now focus on the US Federal Reserve rate decision next Wednesday, as policy divergence may extend the EUR/USD losses.
From a technical perspective, the EUR/USD holds a bearish short-term bias and this week's bullish momentum seems to be coming to an end as the bulls got rejected three times by the 20-day SMA. Repeated failure to take on this hurdle could add pressure on the pair in the upcoming days.
If the EUR/USD breaks decisively the 20-day SMA, currently at 1.0260, it could gain bullish momentum and target next resistances at the 1.0300 and 1.0350 levels.
On the other hand, the next support levels are seen at the 1.0200 psychological mark, followed by the 1.0100 zone and 1.0000 ahead of the cycle low of 0.9952.