The EURUSD pair has completed a strong day of trading when it has shown some bullish signs despite the fact that the dollar has been holding steady across the board yesterday. We believe that the pair is now trying to form a base which will help it to move higher in the short term but with the ECB looming later in the week, traders need to be braced for extra volatility which is likely to drag the pair in any direction depending on how the ECB sees the situation.
EURUSD Likely to be Bullish
Yesterday was the first day of the week and as is normal, the volatility was low in the markets as the traders came back to their desks, prepared themselves for the new week and also began to establish their positions for the rest of the week. It is likely to be an important week for the euro with the ECB statement and press conference scheduled to happen later in the week and over the past couple of months, the market has been waiting for this October meeting to give the euro some direction for the short term.
The ECB had hinted at tapering of the QE a couple of months back but since then, Draghi has been very careful not to sound too hawkish. The market expects the October meeting to set the tone for the tapering and its timeline as well and anything short of that is expected to leave the market extremely disappointed. There have also been reports that the ECB might choose to take it slow and easy as far as the tapering is concerned, which could then mean that the euro could come under pressure in the short term as such a move would belie market expectations.
Looking ahead to the rest of the day, we have the manufacturing and services PMI data from both the eurozone and Germany as well and this is likely to bring in a bit of volatility. But more than that, we expect the traders to begin positioning themselves for the ECB and so expect some consolidation with a bullish bias for the rest of the day.
This article was originally posted on FX Empire