Bulls hold grip ahead of ECB rate decision

The Euro kept firm tone on Thursday despite strong upside rejection at 1.0863 (Fibo 50% of 1.1091/1.0635) on Wednesday, as dips were contained by former strong resistance at 1.0805 (daily cloud base) now reverted to solid support.

Hawkish Fed lifted dollar but so far did not manage to derail Euro’s bulls, although the action slowed and currently holding between two key levels, ahead of ECB rate decision.

The European Central Bank is widely expected to raise deposit rate by 25 basis points to 3.5% (the highest since 2001) today and likely to deliver another 0.25% raise in July, as inflation in the bloc remains unacceptably high (more than three times ECB’s 2% target) and underlying price growth is showing initial signs of easing, suggesting that the central bank would remain on tightening path for some time.

Markets will be focusing on ECB forward guidance which indicates central bank’s near future steps, with main question whether the ECB will pause after July’s hike or will continue with policy tightening, with prevailing expectations for more balanced message which will signal that further actions will be data dependent.

Daily studies remain positive with bullish bias expected above daily cloud base, though firm break of 1.0863 pivot required to signal bullish continuation.

Caution on return and close below daily cloud which would generate initial signal of recovery stall.

Res: 1.0863; 1.0904; 1.0917; 1.0980
Sup: 1.0805; 1.0765; 1.0742; 1.0733