European Central Bank monetary policy meeting among top-tier data/events to keep euro traders busy. The policy decision will be announced at 12:45GMT and the press conference with President Draghi will commence at 13:30GMT.

Central bank meetings are likely to be the big focus point for the forex traders in this week (Jan21-25) along with other top-tier macro data point like PMI surveys. Since December policy meeting lot of data including inflation, PMIs and growth printed weak, hence the euro area growth title on the downside.

Slower pace: We and the market expect no change on Thursday’s meeting, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively.

The outcome of the Governing Council will be slight dovish, but we believe it is nearly priced in for EURUSD. We also expect the main discussion theme to be on the growth assessment. On the policy outlook, we don’t expect any changes to the communication.

We particularly focus on the Draghi’s take on the risk surrounding the EA outlook. Back in Dec 2018, Draghi said, “the risk is broadly balanced.” but he also highlighted “the risk is moving downside.”

  • Nomura Research note highlighted that “the most important discussion this month relates to the TLTROs.”

In a research note, analysts said, “We expect some indication from President Draghi that another round of TLTROs could be announced ahead of the Net Stable Funding Ratio (NSFR) regulations, which become effective from June 2019.”.

  • In contrast, Danske Bank analysts said, “After the ECB decided to end net asset purchases in December 2018, new policy signals are not warranted at next week’s meeting in our view.”.
  • According to the latest World Economic Report of the International Monetary Fund, “The global expansion is weakening and at a rate that is somewhat faster than expected.”.

In the latest World Economic Outlook (WEO) IMF revised forecasts downwards for the EA “Within the euro area the significant revisions are for Germany.” The new forecast also revealed that Germany economic growth expected at 1.3% downgraded from 1.9% in October 2018.

Data preview: The PMI surveys (Thu) coming out softer than expected. 

The following are the top-tier data releases and events that will keep EURUSD traders busy:

German ZEW Economic Sentiment (Tue), EA PMI surveys (Thu), ECB policy meeting (Thu) and German Ifo Business climate (Fri).

TECHNICAL OVERVIEW

The EURUSD trade back to early Jan low’s but stuck to the given tight ranges find between 1.1300-1.1640. After reaching out target point the other week, the price retraced back to the second support finds at 1.1340/1.1330 below here 1.1270 exists. Overnight the price fell to the lowest level since Jan 10.

The mixed daily indicators are not hinting a significant trend change ahead or post the ECB meeting. On the higher side 1.1400-1.1425 serving the first resistance level, above here could squeeze to 1.1460 and 1.1500 levels.

We continue to forecast EURUSD to head higher in the coming weeks. So, we look for another opportunity to return to enter long, probably for 1.1800-1.2000.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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