• The dollar recouped since last week’s low and managed to close the month on a positive note in February.
  • Besides the EURSUD manages to hold the 1.1300 again and we believe the setting for EURUSD cast on this week’s ECB meeting.
  • European Central Bank monetary policy meeting among top-tier data/event to keep euro traders busy.

Data review:

  • Final Eurozone Manufacturing PMI at 49.3 in February vs. Flash: 49.2 and January Final: 50.5, according to IHS Markit. The reading is slipping below 50.0 for the first time since June 2013.
  • Euro area annual inflation is expected to be 1.5% in February 2019, up from 1.4% in January, according to a flash estimate from Eurostat.

Data preview:

ECB:
It’s unlikely that the interest rate will move so all eyes on the Draghi’s communication during the press conference. As we noted earlier, there is a chance of a significant downgrade to growth and inflation. Moreover, economists expect debate on TLRO (Targeted Long-term Refinancing Operation) which is going to expire in June 2020.

“The central bank will likely focus on replacing the long-term refinancing operations. Downgrades to the macro path should provide the backdrop for an announcement of extra bank funding, either at the upcoming March meeting or in April” Said analyst team at Morgan Stanley in a note.

Moody’s analytics team forecast that the central bank will be revised down the GDP to 1.3% in 2019 and 1.6% in 2020, respectively.
“We are penciling in that the bank’s GDP and inflation forecasts for 2019 will be revised down; core inflation has hovered around 1% for a long time, which means that the ECB’s expectation that it will average 1.4% in 2019 looks fanciful” Moody’s Analytics reported.

TECHNICAL OVERVIEW

The price action has been trading in a tight range of 1.1220-1.1570 for last four-months (November 2018-February 2019), The consolidation last extended to the same-months on December 2016-March 2017 followed by a big break higher. This time we are not expecting a big break higher unless the rate differential supports.

Well the daily RSI lacks the conviction to move higher, and the oscillator has turned bearish. These settings suggest a continuation of range trading again in this week.

On Monday, March 04 the price was rejected at the major moving averages 50MA and 100MA that are placed between 1.1380-1.1390, suggesting strong resistance zone on the higher side. Ahead of the ECB meeting (March 07) sustained trade above 50MA-100MA will resume the up move taking the single currency higher towards the next crucial resistance 1.1440.

Whereby it has to go beyond significant resistance of 1.1440 for heading north towards 1.1500 initially followed by 1.1700/1.1740.

Besides, a close below the strong support 1.1200 will push prices lower to 1.1150 initially before touching 1.1100.

View: We remain cautiously NEUTRAL as we continue to study the action.

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

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