The Euro moved higher in early Thursday’s trading after retesting low at 1.2159, posted on strong fall of Wednesday.
Larger bears found footstep here and bounce could be positioning for fresh weakness, as overall picture is negative.
Yesterday’s close below key 1.2172 Fibo support was bearish signal but so far without clear break lower.
Sustained break below critical supports at 1.2172/53 (Fibo 38.2% of 1.1553/1.2555 / low of multi-month 1.2153/1.2555 congestion) is needed to confirm reversal.
ECB meeting is the key event for Euro today. The central bank is expected to leave policy unchanged and ECB chief Mario Draghi is expected to play down recent softness in the bloc’s economy, while traders will be focusing on comments about bond buying program, as Draghi may signal withdrawal of 2.5 trillion euros worth stimulus, which was introduced to boost growth and reduce borrowing cost, despite failing to lift inflation which remains below projected targets.
More hawkish tone from Draghi, which would include further clues about reducing / ending bond-buying program and signal possible rate hike, would boost the single currency.
Positive scenario requires firm break above 100SMA (1.2213) and penetration of narrowing daily cloud (cloud base lies at 1.2239) to generate bullish signal and open way for stronger retracement of 1.2413/1.2159 fall.
Conversely, dovish tone from the ECB President would increase existing pressure on Euro for clear break through 1.2172/53 pivots, which could accelerate towards psychological 1.20 support, reinforced by 200SMA).
Res: 1.2213, 1.2239, 1.2286, 1.2320
Sup: 1.2153, 1.2092, 1.2054, 1.2000
