EURUSD
The EURUSD pair was lower on the week as the dollar found some support for a rally into the weekend. Strong ISM Manufacturing numbers on Wednesday, followed by a lower than expected unemployment rate with the Non Farm Payrolls release has helped the struggling dollar catch a bid.
The U.S. market is shut for the Labor Day holiday so we may not see big volumes in the currency market on Monday. The week ahead has two key events for the Euro, however, with the restarting of Brexit talks and the European Central bank meeting on Thursday.
The ECB meeting will be a key driver of the EURUSD pair in the near-term as traders will get clarity on the bank’s strategy post-virus. No major policy announcements are expected after aggressive moves during the recent crisis, but policymakers have a couple of issues to discuss. In recent months the value of the Euro has been surging despite a drop into deflation territory for the first time since 2016. A trade-weighted index published by the ECB has the Euro near six-yea highs and this is leading to the drop in inflation.
Traders will be watching the press conference to gauge the appetite for the stronger Euro and we may see an attempt to talk it down. Another likely talking point will be the Fed’s recent commitment to a 2% inflation rate and whether the ECB will also follow inflation targeting. Finally, the bank’s bond-buying programs will also be in focus. The program was ramped up during the virus outbreak and the ECB may consider adding to it as ammunition for a recent surge in cases across Europe.
EURUSD is trading within a pennant formation as it seeks a breakout to higher or lower levels. Resistance in the pair stands at the psychological 1.2000 level, while a break below 1.1800 could open up the path to 1.1400. For more in-depth advice on support and resistance levels, and risk management, check out the Investing Cube Trading Course.
