EUR/USD is trading slightly lower in a quiet session as markets await next week's European Central Bank meeting. Scotiabank notes that the short-term bullish trend has weakened and that key support is at 1.1395/1.1405.
The euro has started the week with a modest retreat against the US dollar, in a day of low volatility. The EUR/USD exchange rate is moving in the lower 1.14 range, after losses at the end of last week weakened the bullish momentum it had shown in previous days.
The ECB at the centre of market attention
The main reference for the euro's behaviour is the European Central Bank's monetary policy meeting, which will take place next week. The bank's officials are already in their usual 'quiet period', so there are no public statements to guide investors.
According to Shaun Osborne and Eric Theoret, strategists at Scotiabank, both they and the market consensus expect the ECB to keep interest rates unchanged. The low implied volatility reflects that investors do not anticipate significant surprises in the decision.
"We — and the market — expect it to remain unchanged," the analysts state in their daily note.
In this context, the euro is trading modestly lower in a quiet market, as described by experts from the Canadian bank. Traders' attention is gradually shifting towards the ECB meeting, which will set the tone for the single currency's behaviour in the coming weeks.
Macro data and key technical supports
This week's macro agenda for the eurozone has confirmed that the region's CPI stood at -0.1% month-on-month in June, with a year-on-year rate of 2.8%. Additionally, the eurozone recorded a current account surplus of €25.1 billion in May, a figure that reflects the strength of the balance of payments.
From a technical perspective, Scotiabank analysts maintain a neutral/bullish short-term outlook, but warn that gains have stalled at the upper end of 1.14. The loss of minor support in the mid-1.14 range during trading at the end of last week has weakened the bullish bias.
"Losses below minor support in the mid-1.14 range have weakened the short-term bullish bias and could cause the spot price to retest support at 1.1395/05 in approximately the next day," Osborne and Theoret point out.
For investors closely following the EUR/USD cross, this level of 1.1395/1.1405 becomes the key reference to watch. If the euro loses this area, it could open the door to a broader correction. Conversely, if it manages to hold it, the short-term bullish trend could resume once the ECB's verdict is known.
Next week, with the ECB decision and the subsequent press conference by its president, Christine Lagarde, an increase in volatility is expected. Until then, traders will have to settle for sideways and low-volume movements in a market that seems to have entered 'wait mode'.
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