EURUSD Will the ECB Gift Us a Pullback to 1.08?

14. Dez. 2023

During the early European trading hours on Thursday, the EUR/USD pair is gaining momentum around the 1.0900 level. This rise in the major pair is supported by the weakness of the US dollar following the Federal Reserve's monetary policy decision. Investors will be closely watching the upcoming ECB interest rate decision. Supported by a sharp decline in the US dollar, the EUR/USD pair has surpassed the 1.0820 level and has risen towards the 1.0900 area. There is a decent resistance in this zone that could potentially limit further gains. However, an upside break above this level could trigger additional gains, with the next resistance seen at 1.0930. The EUR/USD pair has gained over 100 pips after the Federal Reserve meeting, reaching the 1.0900 area. Despite the magnitude of the move, momentum remains firmly bullish, supported by the decline in the US dollar. As expected, the Federal Reserve kept interest rates unchanged during the meeting. In their projections, policymakers anticipate more rate cuts in 2024. These forecasts by the FOMC staff have triggered a rally in US bonds, with the 10-year yield dropping to 4%, its lowest level since August. At the same time, the US Dollar Index has lost nearly 1%, approaching the 102.50 area. The European Central Bank (ECB) will announce its decision on Thursday. Interest rates are expected to remain unchanged for the second consecutive meeting. There will likely be discussions regarding the reinvestment of the PEPP and the Minimum Reserve Requirement, but no decisions are expected at this time. ECB President Christine Lagarde will hold a press conference, and new macroeconomic projections from staff will be released. A downward revision of inflation and growth forecasts is expected. If there are no surprises from the meeting, the market impact could be limited. Now, attention is turning to what the ECB will do next year. Markets appear inclined towards accommodative policy, with a rate cut already priced in for the April meeting. This expectation has weighed on the euro, and Thursday's meeting will likely provide further guidance for future positions. In the United States, after the Fed meeting, attention will once again shift to data. Weekly reports on jobless claims and retail sales are scheduled for Thursday. The US dollar has resumed its decline after the FOMC, supporting a potential rise towards 1.1000. However, the ECB could halt the rise on Thursday, or Eurozone PMI data on Friday could influence the situation. The H4 trend is clearly bullish, but I expect two scenarios that I will carefully evaluate pre and post ECB: the first is a continuation with a breakout of the current supply zone highlighted in red on the chart, followed by a retracement, or an immediate post-ECB pullback to the top of the bullish channel originating from the post-Fed price.