The focus for today will be the ECB monetary policy announcement where baseline interest rates are expected to be held steady but the market will look for any signal regarding the quantitative easing (QE) program. Recent comments Peter Praet, a member of the Executive Board of the ECB, gave a strong hint that the June meeting would see the ECB signal the end the QE. However, recent economic data has shown that Eurozone growth has slowed since the beginning of this year and there may be some reluctance to commit to ending QE. Without a clear signal to end QE, the monitory policy differential between the ECB and Fed could be bearish for the Euro and trigger another leg to the downside.
On the 4-hourly chart, EURUSD has formed an inverted head and shoulders pattern with a measured target of 1.1920. Provided the pair remains above support at 1.1800, upside continuation is likely with resistance near the 38.2% retracement of the April highs at 1.1840 and then 1.1890. A reversal below 1.1800 would negate the bullish outlook and the pair could continue to the downside with support at 1.1730.
After the FOMC announcement yesterday, Gold has been strengthening and is now trading at a critical level ahead of the ECB. In the daily timeframe, Gold is trading the major horizontal resistance near 1305. A decisive break of 1305 is needed to open the way to a move towards resistance at 1317 and then 1326. On the flip side, a bearish reversal and break of trend line at 1290 would see a downside continuation to supports at 1285 and then the 38% retracement from the Oct 2016 lows at 1272.