EUR/USD: 1.3525The Euro has done little today, ahead of the ECB meeting, and has spent the session in a 1.3492/1.3595 range.
There has been little real news and it has been down to various politicians expressing their contradictory views on whether, or not, the Euro is overvalued that has governed market direction . The French President, M. Hollande today called for a target exchange rate to protect the Euro from "irrational movements". This idea quickly got kicked into touch by German officials, so we now await Mr Draghi's view on the subject.
The ECB is expected to leave interest rates on hold and the focus will be on Draghi's subsequent news conference, where, in the end he probably won't even mention the Euro at all and the market will more likely take its direction on his thoughts on economic growth.
In the meantime, the momentum indicators are pretty flat, with the Euro currently holding uptrend support currently at 1.3490. Should the market take the press conference in a negative manner, the Euro will head down towards 1.3430 (61.8% of 1.3250/1.37100) and below this towards 1.3360 (76.4%). I would not think we go below this, but if wrong, there is some congested price action that could take us back down toward 1.3250. Doubtful.
A positive statement would see the Euro run higher but it would run into good sellers in the 1.3600/40 area, a break of which would tend to head back towards last Fridays 1.3710 high.
With the dailies still suggesting that we have room on the topside, my preference remains to look for short term dips before a return of some Euro strength in the medium term. Ahead of the G20 meeting on 15/16 Feb, the Euro could easily chop around in a wide 1.34/1.37 range, with politics in Italy and Spain likely to ensure that we do not get carried away on the topside.
