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EUR/USD Price Forecast – EUR/USD Trade Range Bound With Positive Bias Ahead of ECB Rate Decision Update

EURUSD pair is currently trading range bound near previous session’s highs. The pair hit an intra-day high of 1.13871 on Italian budget headlines. Reports stated that Italian Prime Minister Conte proposed a 2.04% deficit target for 2019 to the European Commission mentioning that new new target was possible because budget measures were less costly than the first elaborations. Risk sentiment in market improved on news of release of Huawei CFO and comments from US President Donald Trump stating that he is ready to intervene if necessary in order to avoid any cause of rise in tensions between US & China trade negotiations. Asian market saw boost in price action as headlines indicated China’s willingness to open its markets to foreign companies further improving risk sentiment surrounding equity and forex risk assets.

Investors Expect Draghi To Hint At Minimum One Rate Hike During Today’s Update

But most important factor that helped boost EURO was overnight headlines which saw PM May survive vote of no-confidence in UK Parliament held yesterday evening which is viewed as welcoming relief amid Brexit and UK political uncertainties. However upward price action was limited as North American market hours saw  positive price action in US equities and an advance in U.S. Treasury yields which underpinned US Greenback providing some fundamental resistance. Risk reversals on EUR/USD, a gauge of calls to puts on the common currency, has jumped to six-month highs, indicating investors are trimming bearish bets to position for a rally in the EUR. Put demand has hit six-month lows ahead of the ECB rate decision as investors are expecting Draghi to say that at least one rate increase in 2019 is still on the table. That would indeed push the US-German yield differential to fresh multi-month lows, leading to a broad-based rally in the EUR.

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However, both the the common currency could take a beating if Draghi sounds dovish, forcing markets to scale back expectations of 2019 liftoff. On the release front, European market hours will see release of German CPI, French HICP, EU Leaders Summit, EU Deposit Facility Rate data and ECB Interest Rate Decision, while US markets will see release of Import and export price index and Initial jobless claims data. When looking from technical perspective, the 1.1300 handle remains a key trigger for bearish traders. A convincing breakthrough the mentioned support is likely to accelerate the fall back towards yearly lows, around the 1.1215 region, before the pair eventually breaks through the 1.1200 mark and head towards testing the next support near the 1.1160 area. On the flip side, a short-term descending trend-line, currently near the 1.1400 handle, might continue to keep a lid on any attempted up-move. On a sustained move beyond the said hurdle the pair will proceed towards resistance zone at 1.1435-40 price level.

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This article was originally posted on FX Empire

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