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EURUSD maintaining a sideways phase?

Market Analysis

EURUSD, H1

Today European stock markets move higher, led by the GER30, which is up 0.85%. The UK100 is trading behind but also up 0.39%. The move higher in European markets comes after a largely positive session in Asia overnight that was underpinned by gains on Wall Street and a dip in long yields. However, while Bund yields declined early in the session, they are now moving higher with Gilts. Eurozone peripherals meanwhile are outperforming and the reversal of safe haven flows is adding to pressure on core markets. Nevertheless, EUR  clocked a three-session high of 1.2355 on a continued the dollar, after it broke the 200-period EMA in the hourly chart, on London open. Hence it is likely to retest today, the next recent swing high at 1.2360, which also confluence with the 20-DAY SMA.

Technically, the intra-day chart for EURUSD presents that pair is trying to regain the losses seen last week, by retesting the 20-DAY SMA. However, the euro is trading more mixed against other currencies, suggesting that forex markets are not too perturbed by the next weekend’s general election in Italy, where attention will be on how well EU-sceptic parties, such as the Northern League, fare. Hence, EURUSD is expected to remain in the consolidation mode between 1.2240-1.2360, seen since Wednesday. Therefore only a break above 1.2360 today could give us a potential direction for the pair. Otherwise, is likely to continue ranging.

Meanwhile, the March ECB meeting is just over a week away and the big question will be whether Draghi will finally remove the possibility of further asset purchases. ECB President Draghi will have a chance to clarify the central bank’s stance at his testimony to the European Parliament today at 14:00 GMT, and he is expected to repeat the central message that growth remains robust, and inflation is slowly returning to target, but with the help from the still very expansionary monetary policy. Indeed, the ECB’s position is that policy will remain supportive even after the end of net asset purchases, as the central bank will continue to re-invest redemptions and unlike the Fed, won’t reduce its balance sheet any time soon. Bundesbank President Weidmann will deliver the bank’s annual report on Tuesday.

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Andria Pichidi

Market Analyst

HotForex

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