EUR/USD Upbeat Ahead of Inflation & ECB

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EUR/USD – H4

Eurozone's final Consumer Price Index had risen 5% year-over-year in December and today market participant await the preliminary reading for January, due shortly (10:00 GMT).

The European Central Bank hands down its monetary policy decision on Thursday, with seemingly not much to expect out of the meeting, but markets will be closely watching Ms Lagarde's press conference for any commentary around interest rates.

The ECB seems less worried about Inflation compared to its major counterparts, while in December, it had announced changes to its asset purchases. It will discontinue net asset purchases under the Pandemic emergency purchase programme (PEPP) at the end of March 2022 and the Asset purchase programme (APP) pace will increase (from 20 bln/month) to €40 billion/month in the second quarter.

These events have the ability to cause increased volatility, produce outsized moves and determine the trajectory of EUR/USD, so caution is needed.

The pair made a relief-rally over the past two days, rebounding from last month's poor performance and 2022 lows. It now tries to surpass key 1.1300-15 area, which includes the EMA200 and the lower border of the Daily Ichimoku Cloud. Successful effort can open the door towards 1.1420, but we remain cautious regarding its upwards aspirations.

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As long as it stays below the aforementioned key technical levels, it is vulnerable to fresh pressure back towards 1.1200-1.1185, but the 2022 lows appear distant at this stage (1.1120-1.1099).

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

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