Make or break time for the EUR/USD pair one day ahead of the ECB June meeting. The main currency pair on the FX dashboard has traded in tight ranges lately.
In the past several weeks, the pair hovers close to its 2021 highs established at the start of the year. Moreover, every dip is bought aggressively, no matter if the economic data warrants the bounce or not.
The first two trading days of the week brought ranges so tight in the EUR/USD pair that they compare to the Christmas holiday. Yesterday, for example, the pair moved in a less than thirty pips range.
But things are poised to change. The European Central Bank’s decision tomorrow is highly expected to bring back the much-awaited volatility. As FX traders know, when the EUR/USD pair is not moving, the entire market is ranging.
Speaking of the European Central Bank, the key is how it will communicate its PEPP tapering and what it signals for the second half of the year. Most of the outcome is already priced in, if we think of the bid tone behind the euro since the start of April. Yet, subtle nuances may trigger sharp market reactions.
Both bulls and bears have something to trade. Bulls may want to wait for a close above 1.2250 before going long with a stop at 1.2150 and targeting a new high for the year. On the other hand, bears may want to sell a close below 1.2150 with a stop at 1.2250 and target a move below 1.20.
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