Euro Dollar Forecast: EUR/USD Rangebound Ahead of ECB Policy Meeting Accounts
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Euro Dollar Outlook:
- EUR/USD poised by economic events
- Price Action clings to Fibonacci resistance
- Moving Average provides support
- MACD remains above the zero line
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EUR/USD conflicted ahead of ECB
With less than a month before the US presidential elections, hopes of additional US stimulus remain dismal, even though discussions of a standalone airline bill are appearing to take shape. However, even the Federal Reserve has suggested that additional stimulus may be required for a swift economic recovery to be possible.
Meanwhile, the second wave of the Coronavirus outbreak in Europe has raised concerns, as France and Spain have reported the largest number of new cases since April, reiterating the fact that the pandemic is far from over. So far, the ECB appears to be adopting a wait-and-see approach to monetary policy with the Governing Council insisting that the EUR 1.350 trillion envelope for the Pandemic Emergency Purchase Programme (PEPP) “should be considered a ceiling rather than a target.” In addition to this, the Brexit deadline is fast approaching, and details surrounding a Deal are still unknown. The upcoming ECB minutes may shed more light on the council’s thinking.
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EUR/USD Technical Analysis
Currently, the four chart below highlights how the Fibonacci retracement (taken from the 16 July low to the 1 September high) has continued to provide support and resistance for the major currency pair. This confluent zone has kept both bulls and bears at bay, just short of the psychological level of 1.18.
However, the 50-period Moving Average has provided additional support for the EUR/USD, while the Moving Average Convergence/Divergence remains above the zero-line, a possible indication that the pair may still be considered overbought, at least in the short-term.
EUR/USD Four Hour Chart
Chart prepared by Tammy Da Costa, IG
EUR/USD Strategy Ahead
For now, the psychological level of 1.18 continues to hold as resistance. A break above this level could see the 23.6% Fibonacci retracement level forming resistance at 1.18604
Contrary to this, support is provided by the moving average at a level of 1.173 with the next support level forming at the 50% retracement level at 1.16916
IGCS shows that, at the time of writing, 65% of retail traders are holding short positions in the EUR/USD. We typically take a contrarian view to crowd sentiment, and the fact that traders are net short, suggests that prices may continue to rise.
--- Written by Tammy Da Costa, Market Writer for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
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