EUR/USD keeps lower on the session but not doing a whole lot
The pair is sitting slightly lower as the dollar is keeping firmer across the board, but also as price is backing off after encountering some resistance from the swing region around 1.1239 near the 16 March high.
Sellers are threatening to snap the seven days of gains by buyers but essentially, a lot will come down to the ECB policy decision later today.
In that regard, the key thing to watch is whether or not the ECB will expand the size and duration of its PEPP stimulus measure.
Most market players are expecting a roughly €500 billion increase with some likelihood for the stimulus measure to be extended into the middle of next year potentially.
But anything less than that or perhaps the ECB even choosing not to deliver on taking a more proactive approach may spell some trouble for the euro later in the day.
On the flip side, a stronger signal on PEPP i.e. an additional €750 billion or more (which would double the original amount) will exude more confidence to the European bond market and that could have positive spillovers for the euro as well.
There’s also the consideration for the ECB to include fallen angels into its asset purchase programmes but that runs some other risks from a legal and risk management standpoint. I’ll try and detail that more later on in a separate preview.
For EUR/USD, the euro side of the equation will finally have its say today and depending on what the ECB decides, it will play a role in dictating where the next battleground in the pair will be over the next few sessions.
The 1.1200 level is proving to be a bit of a sticky point for now, so that is unlikely to change going into the ECB meeting but there is further support closer to 1.1167-75 as well should we see the dollar keep firmer over the next few hours.