EUR/USD traded within the range of the past 2 months. Dovish minutes of the Federal Reserve’s meeting allowed the euro to rise to 1.0950, although improved market sentiment on the recovery in oil prices and the Bank of Japan’s monetary easing made the euro turn down below 1.0900.
At the same time, it seems that the effect of Mario Draghi’s bearish comments has worn down. According to the media, the members of the ECB Governing Council don’t agree about potential increase of monetary stimulus in March. So, there are reasons to believe that the downside of the euro will be limited. Support is at 1.0815/00 and 1.0710.
On the other hand, the dovish outcome of the Fed’s meeting has already been priced in by the market. We don’t rule out the possibility of a rate hike, and the overall divergence in policy between the ECB and the Fed remained. The euro area’s inflation data improved a bit, although statistics from Germany was poor. We assume that sideways trading will persist in EUR/USD with the focus on its lower border. Strong resistance is located at 1.1000/1.1050 (200-day MA, downtrend resistance line at 2014-2016, 55-week MA).
The upcoming release of Chinese statistics on Monday and Wednesday can once again worsen the market’s mood and increase demand for the euro. In the euro area’s economic calendar all events are of medium and low importance.