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EURUSD May Fall as ECB Disappoints the Euro Bulls

EURUSD May Fall as ECB Disappoints the Euro Bulls

Martin Essex, MSTA, Analyst

EURUSD news and analysis:

- The European Central Bank’s Governing Council will discuss ending its stimulus program today but an announcement of the end of QE is unlikely until July.

- That could weaken EURUSD unless ECB President Mario Draghi adopts a hawkish stance at his press conference after the meeting.

Check out the IG Client Sentiment data to help you trade profitably.

ECB tapering announcement unlikely

The European Central Bank’s Governing Council, which sets monetary policy for the Eurozone, will likely discuss when to end its stimulus program for the Eurozone economy at its meeting in Riga, Latvia, today. However, ECB President Mario Draghi and his colleagues are not expected to announce the end of its asset purchases until their July 26 meeting in Frankfurt, Germany.

That would likely disappoint those expecting an announcement today and weaken the Euro unless Draghi strikes a hawkish note at his news conference after the meeting.

EURUSD Price Chart, One-Hour Timeframe (May 29 – June 14, 2018)

Latest EURUSD price chart

Chart by IG

Today’s meeting comes against the background of a strengthening Euro, which has been climbing against the US Dollar for more than two weeks, partly on speculation that the ECB will cut its bond-buying program to zero by the end of this year. Last October it decided to reduce its asset purchases from €60 billion per month to a new monthly rate of €30 billion from January until the end of September.

One possibility is that it tapers those purchases to zero by year-end but it is likely to tread warily until it sees more Eurozone data on economic growth and inflation. So, while it will be discussing policy options today, it may not be ready to announce yet that it is pulling the trigger.

Technical outlook for EURUSD

Meanwhile, from a technical perspective, EURUSD is now facing near-term resistance at the 1.1840 June 7 high and could ease back to the cluster of lows around 1.1745 touched yesterday.

However, retail trader sentiment data suggest a more bullish outlook for the pair. The figures show that 48.7% of traders are net-long, with the ratio of traders short to long at 1.05 to 1. The number of traders net-long is 9.2% lower than yesterday and 8.9% lower from last week, while the number of traders net-short is 11.2% higher than yesterday and 13.3% higher from last week.

At DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURUSD-bullish contrarian trading bias.

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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