FXstreet.com (Córdoba) - The euro weakened on Wednesday versus
the dollar although trading remains relatively subdued as investors
remain sidelined ahead of the European Central Bank monetary policy
decision tomorrow. Meanwhile, the US dollar trades overall firmer
as the FX market is still in consolidation mode, while stocks are
up after a 2-day slide.
"Without much to fundamentally drive the FX space, and since most
majors are firmly in consolidation mode, watching key levels and
playing the ranges looks to be the best tactical strategy at the
moment", says the TD Securities team. "For the EUR, yesterday's
high of 1.3140 appears to be the short term cap, but the much more
important pivot point is clearly on the downside, at 1.3000/10".
Looking at the ECB decision
The European Central Bank will decide on monetary policy on
Thursday and although no changes are expected just yet, investors
will be paying special attention to Draghi's rhetoric.
"The single currency may continue to give back the rally carried
over from the previous should President Mario Draghi talk up
speculation for another rate cut", says David Song, analyst at
DailyFX. "As the ECB sees inflation falling below the 2% target
over the policy horizon, the threat to price stability may prompt
the Governing Council to adopt a highly dovish tone for monetary
Meanwhile the euro…
The shared currency fell to a low of 1.3035 on Wednesday and holds
a slight bearish tone trading around 1.3050. If the EUR/USD breaks
decisively below the 1.3035 area, it could quickly reach 1.3000
while below this latter 1.2950 comes into view. On the other hand,
a recovery above 1.3100 would ease the immediate pressure.
According to the Wells Fargo analyst team, the mixed tone seen in
the US dollar leaves the impression of a market that, at least for
the time being, does not have a strong directional trend. "We
expect the recent back-and-forward trading pattern to continue,
while maintain a modestly positive overall bias for the commodity
and emerging currencies, and a neutral bias for the euro, yen and
pound", they say.