EUR / USD stays lower on session but does little
The pair is down slightly as the dollar strengthens at all levels, but also as the price recedes after encountering some resistance from the swing region around 1.1239 near the March 16 high.
The sellers are threatening to cancel the buyers’ seven-day gain, but essentially much will depend on the ECB’s political decision later today.
In this regard, the key element to watch is whether or not the ECB will expand the size and duration of its PEPP stimulus measure.
Most market participants expect an increase of around € 500 billion, with some likelihood of a potential extension of the stimulus in the middle of next year.
But nothing less than that, or perhaps the ECB, even choosing not to take a more proactive approach, could cause trouble for the euro later today.
On the other hand, a stronger signal on PEPP, i.e. an additional 750 billion euros or more (which would double the initial amount) will give more confidence to the European bond market and this could also have positive spillovers for the euro.
The ECB is also considering including fallen angels in its asset purchase programs, but this involves other risks from a legal and risk management perspective. I will try to detail this later in a separate overview.
For EUR / USD, the euro part of the equation will finally have a say today and depending on what the ECB decides, it will play a role in dictating the location of the next battlefield of the pair over the next few sessions.
The 1.1200 level turns out to be a tricky point at the moment, so it’s unlikely to change before the ECB meeting, but there will also be support closer to 1.1167-75 if we see the dollar firming at over the next few months. hours.