We are heavily bearish the EUR against the USD & GBP as per our previous posts and we see any bounces in the Euro as selling opportunities. Today we have the ECB meeting and our view of the likely reaction and the key technical levels to watch are below…
In terms of the ECB We don’t expect any changes to ECB’s policy despite the recent sell-off in global bond markets and its potential impact on financing conditions – we would expect them in terms of forecasts to increase their inflation number and decrease there growth figures – In terms of action its unlikely they will make any major policy changes For now ECB chair Christine Lagarde will simply reinforce the message of the ECB reiterating the ECB’s commitment to maintain a very accommodative in terms of financing conditions until inflation tops 2%.
Some investors are seeing potentially some action in terms of the pandemic emergency purchase program (PEPP). There is a view the bank front-load their purchases to curb bond yields which have been rising recently. A decision to increase purchases would help drive down yields abut its a short term fix and we don’t think The ECB will take the option up – if they do its bearish but we don’t think they will act yet.
In conclusion, we expect no big shocks from the meeting and the euro fundamentals are long term bearish against both the UK and US – Lower prices in EUR/USD and EUR/GBP are expected longer term and we view the recent euro bounce in the Euro as a selling opportunity.
EUR/USD
On the chart below we have rallied back to nearby resistance and we have corrected the EUR’s oversold condition level. If nearby resistance holds we see the euro as a sell with a stop back well behind 1.200 resistance. If however we were to rally up to trade above the 1.200 level we would sell back through the round number with a stop behind 1.2100 resistance.
EUR/GBP
On the daily chart below we can see the 20 day moving average (Green Line) has been holding rallies throughout 2021 and we view the euro as a sell back to the level with stop behind next level resistance. In terms of targets, on the monthly chart below, we expect a move down to at least 0.8200 level. We have a big trend which in our view as far further to run on the downside.
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