EUR/USD and EUR/GBP hold their ground ahead of ECB decision while AUD/USD aims to build on recent recovery
The euro is holding firm as markets await the ECB decision, while the Aussie is hoping to continue its recovery against the US dollar.
EUR/USD moving higher ahead of ECB decision
European Central Bank (ECB) day has arrived, and the EUR/USD is attempting to build on yesterday’s bounce against the dollar, which itself has come off support around the $1.08 zone. The next target in the event of further gains would be a move towards the 50-day simple moving average (SMA) at $1.1107, and then on to the peak from early April back towards $1.12.
But at present it might be difficult to envision a particularly hawkish ECB meeting. The uncertainty surrounding the economy, partly thanks to the war in Ukraine, means that it is tough for the ECB to sound too aggressive in its rhetoric. It will likely stick to its view that rate rises will only come after the asset purchase programme is wound down, which is likely to be June or later.
This puts the euro at a disadvantage versus the dollar, where 50 basis points (bps) rate hikes are expected from May.
EUR/GBP holds above support
We can expect the EUR/GBP to be in focus today as the ECB meets, and following on from UK data this week which showed that inflation remained strong and employment continued to recover. The steady downtrend that has prevailed for most of the past year has actually stalled in recent months, with the price mostly showing a reluctance to head below £0.83, aside from the sharp dip in early March.
A more hawkish tone from the ECB could be the spark that the pair has been looking for to head higher, with a move above the peak this week of £0.837 providing a more bullish catalyst that could then see the price make headway towards £0.844.
Meanwhile, a break below £0.83 would spark a bearish move that would put the lows from early March at £0.82 back into view.
AUD/USD looks for further gains
After rallying sharply yesterday the price is looking for a fresh move to the upside, although an immediate catalyst is lacking. The AUD/USD has rallied since February, with a higher low in mid-March, and a higher high at the beginning of April.
The most recent pullback has seen the price head towards $0.74, but if the price can stabilise here then a higher low may be established, potentially putting fresh strength into the uptrend.
Higher commodity prices continue to support the Australian dollar versus its US counterpart, which helps to explain why the pair has rallied while others such as EUR/USD and GBP/USD have remained under pressure. Sellers will want to see a drop back below $0.74 to provide a more bearish view and suggest at least that the pullback from the highs of April has some further room to run, potentially towards $0.733.
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