EURUSD: Expect No Major Movements This Week

Summary:

The EURUSD pair is in a tight range today as traders wait for the testimony by Jerome Powell. But analysts at Danske expect it to remain in a tight range

The EURUSD pair is little changed today as traders wait for a testimony by the Federal Reserve chair and key flash PMIs later this week. Analysts at Danske Bank believe that these events will not have a major impact on the pair because the recent rate decisions have already been priced-in.

The EURUSD has been in a tight range recently. Two weeks ago, it reacted mildly to the European Central Bank decision (ECB). The bank left rates unchanged and pledged to continue supporting the economy. Now, according to the Financial Times, the bank has started conducting a comprehensive review of its pandemic emergency purchase program (PEPP).

This review will assess the impact of the bond purchasing program on its other programs like the asset-purchase program. The key issue is that some of its policymakers are questioning how long it should continue and whether some of it should be transferred to the asset purchase programs.

The EURUSD also reacted mildly to the Fed interest rate decision last week. As most were expecting, the bank left rates unchanged and sent signs that rates would remain this low for longer. Therefore, analysts believe that Jerome Powell’s testimony to congress will not have major impacts on the pair. Danske Bank said:

“To see EUR/USD break to the upside, FOMC members would need to flip communication in a dovish direction and signal more support while PMIs should surprise on the upside. Our main scenario is broadly unchanged spot by week-end.”

EURUSD technical outlook

The daily chart below shows that the EURUSD has been in a tight range recently. Today, the price is trading at 1.1867, which is a few pips above last week’s low of 1.1750. The price is also slightly above the support of the horizontal channel. Most importantly, it is slightly below the middle line of the Donchian channel indicator.

Therefore, a move above this line will likely see the pair move higher and retest the upper side of the channel at 1.2000. On the flip side, a move below last week’s low of 1.1750 will invalidate this trend.