EUR/USD: Bears eye 1.1500 amid pre-ECB caution trading

The EUR/USD pair ran into fresh offers post-European open, now pushing the rate closer towards 1.1500 levels.

EUR/USD: Ranging ahead of ECB decision

The spot attempted a minor-pullback last hours, but in vain, as the corrective slide regained momentum, with the European traders looking to take profits off the table on their EUR longs and clear out positions ahead of key risk event for the major this week – the ECB monetary policy decision.

Markets are widely expecting the ECB to signal a start of the QE tapering from this September, eventually hiking the deposit rates by early next year. Any dovish surprise delivered in the ECB policy statement and/or by Draghi’s speech could knock-off the Euro sharply lower across the board. Hence, markets have shifted on the side-lines and refrain from placing any directional bets, leaving the pair ranging lower.

Moreover, the extension of broad based US dollar recovery amid higher Treasury yields also collaborate to the downbeat tone seen around EUR/USD. The USD index edges +0.18% higher to 94.63, extending the recovery from eleven-month lows struck yesterday at 94.27.

In the day ahead, the spot will continue to track the USD dynamics, in absence of fresh catalyst from the Euroland, as markets await the US housing starts and building permits data for near-term trading opportunities.

EUR/USD Technical Set-up  

According to Karen Jones, Analyst at Commerzbank, “EUR/USD is positive but cautious: The market remains bid and although we are cautious due to the second 13 count, and a second TD resistance at 1.1587, further gains look likely. We note that the new high has been accompanied by a divergence of the daily RSI and would allow for a retracement very near term.”

“Nearby support is provided by the short term uptrend at 1.1351 and the high from mid June at 1.1296, and while above here, there is scope for 1.1616, the May 2016 high and then 1.1713/36 the August 2015 high and long term Fibo”, Karen added.