The ECB meeting failed to bring the much-awaited volatility in the euro pairs. The EUR/USD seen here traded in a very tight range for over a month now – about a hundred pips or so. Every attempt at the downside was met with heavy buying, and that is exactly what happened yesterday during and after the ECB meeting.
The ECB decided to leave the monetary policy unchanged – both the interest rate level and the PEPP purchases. However, it increased its growth outlook for the Euro area economies, both for the current and the next year.
Because of that, the euro was supported on dips, even though it is hard to find any hawkish outcome from the ECB meeting, considering that its staff projections show inflation at only 1.4% by 2023. We should all remember that the main driver for the ECB monetary policy should be its mandate’s fulfillment – to bring inflation below but close to 2%.
Besides leaving the PEPP program unchanged for now, the feeling persists that the ECB is getting ready to taper by the end of the summer. This is what keeps a bid tone behind the euro, and the unknown regarding what the Fed will do next.
Bears may want to wait for a break and close below 1.21 below, going short with 1.2250 stop and a target at 1.1850 and beyond.
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