EUR/USD: Will The 1.08-Support Withstand Pressure Ahead Of The ECB Meeting?

Dear Traders,

We welcome you to a new trading week which promises to be very interesting concerning events as the highly anticipated European Central Bank monetary policy meeting on Thursday and several important Consumer Price Reports scheduled throughout the week.

The euro generally benefited from the reversal of funding currency trades, which is why the euro trended higher against the U.S. dollar. In addition, the greenback received no support from Friday's U.S. Retail Sales report, which fell short of expectations. However, the 1.10-1.1050-area remains an important key resistance for the EUR/USD and before approaching that barrier, the currency pair has tagged a fresh resistance at 1.0985, from where it currently reversed, falling back below 1.09.

The British pound extended its losses against the dollar and touched a fresh low at 1.4248. Currently, we see a lower support at 1.4230 and 1.42. While some correction may occur in the near-term, sterling is facing new downside risks this week as economic reports are forecast to show inflation remained low, wage growth slowed and retail sales declined. Furthermore, Bank of England Governor Mark Carney is scheduled to speak on Tuesday.

The GBP/USD may start the week with a pullback towards 1.4335. A short-term resistance is seen at 1.4390 and 1.4420.

EUR/USD

Euro traders are awaiting the ECB meeting on Thursday and the majority of economists predict the ECB president Mario Draghi will announce more stimulus as early as in March. The ECB will publish updated inflation and growth forecasts at its March meeting. While the central bank is expected to keep all interest rates unchanged this week, the focus will be on the ECB press conference and any trend-setting comments of Mr. Draghi.

Looking at the daily chart we will turn our focus to the 1.08-level. Once this level has been breached to the downside, we expect the currency pair to drop towards 1.0730, 1.07 and even 1.0625 in a next step. On the topside, upward movements could be limited until 1.0970. However, above 1.0985 the euro could rise towards 1.1015 and 1.1060.

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