EUR/USD manages to hold above 1.1000 ahead of ECB

The bulls were rescued by a fresh sell-off in the USD/JPY pair, which sent the US dollar sharply lower across the board and thereby lifting EUR/USD from just ahead of 1.10 handle.

EUR/USD capped in 40-pips range, ECB eyed

Currently, EUR/USD now +0.10% higher at 1.1025, quickly bouncing-off a dip to 1.1005, session lows. The main currency pair continues to trade quite choppy in a 40-pips narrow above 1.10 barrier as nervousness set into markets just remaining few hours away from the much-awaited ECB monetary policy decision, which will be followed by ECB Chief Draghi’s press conference.

Markets are widely anticipating the ECB to leave interest rates unchanged, while pricing-in some changes in the asset purchase program. Further, analysts believe the main focus for today’s meeting is likely to be the Brexit impact and latest Italian bank crisis.

Analysts at BAML noted, “Even barring any hard announcements, we expect Draghi to start preparing markets for QE extension after March 2017, which would be negative for the Euro keeping everything else constant. Although the market already expects QE extension, relaxing some of the QE constraints to keep QE open ended-such as abandoning the capital key-is not fully priced in yet.”

“Having said that, we do not expect a strong Euro move for now, and with the pressure off the ECB to over-deliver next week, the Euro may remain broadly range-bound.“

EUR/USD Technical Levels             

In terms of technicals, the pair finds the immediate resistance 1.1089/1.1100 (200-DMA/ round number). A break beyond the last, doors will open for a test of 1.1169 (50-DMA). On the flip side, the immediate support is placed at 1.1000 (key support) below which 1.0950 (psychological levels) could be tested.