Technical Analysis

Euro upside looks for validation from the ECB later

Among the major central bank decisions this week, the ECB is likely to end up as the most straightforward one. Policymakers have been consistent and firm in their messaging, reaffirming a 50 bps rate hike while maintaining a more hawkish rhetoric. That has been enough to keep the euro in a good spot to start the new year and the momentum looks set to continue.

EUR/USD is eyeing a push above 1.1000 now, with buyers also starting to approach its 100-week moving average (red line) at 1.1072 after another solid week of gains so far this week:

That is the next key hurdle for euro buyers to get through after a push above the 50.0 Fib retracement level of the downswing since 2021, seen at 1.0942.

Meanwhile, EUR/GBP is also on the ascend and is starting to look towards fresh highs this year with buyers eyeing the 0.9000 mark:

A divergence in terms of policy management and outlook between the BOE and ECB might just be the trigger for such a push and we could get that as soon as today.

In terms of the euro getting validation from the ECB, I think there’s not much to worry as I would expect policymakers to keep reiterating that they are still on the path of 50 bps rate hikes – especially after the inflation data this week.

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