ECB Preview: what to expect of EUR/USD

The European Central Bank will hold its monetary policy meeting later in the European afternoon. Market consensus expects the central bank commanded by Mario Draghi to keep its benchmark rate on hold at 0.00%, while expectations of the potential extension of the QE programme beyond March 17 remain on the rise.

In view of the ‘Global Strategy’ team at TD Securities, “With rates and QE likely to be left unchanged this week, the initial market reaction will likely be one of disappointment. However, during the opening statement and press conference we do think that Draghi is likely to announce that an extension of the APP is being reviewed and considered and was discussed by the Governing Council. He should be able to hint strongly enough at an extension beyond March that markets are satisfied that more QE is coming, leaving a dovish tone at the end of the day despite the initial disappointment”.

Regarding FX, EUR/USD keeps the positive note so far today, navigating weekly tops near 1.1280 although gains remain somewhat limited around the 1.1310/15 band, where currently sits the resistance line off 2016 tops. If cleared, the next hurdle comes at 1.1367 (August’s top). On the downside, the initial support emerges around the 1.1190 region, where are located the 2014-2016 support line and the 38.2% Fibo of the June-August up move. Further south, there is nothing relevant until the 200-day sma today at 1.1138.