EUR/USD: Bullish breakout invalidated ahead of the ECB

• EUR/USD charted a bearish engulfing candle on Wednesday, invalidating Monday’s bullish breakout. 
• The ECB is expected to keep rates unchanged. 
• The focus is on ECB’s forward guidance on interest rates and TLTRO 3

EUR/USD is lacking clear directional bias ahead of the all-important European Central Bank (ECB) rate decision, due today at 11:45 GMT. 

The currency pair witnessed a descending triangle breakout on Monday. The bearish-to-bullish trend change, however, was short-lived with the pair forming a bearish engulfing candle on Wednesday. 

Therefore, the immediate outlook is neutral. A break below 1.1220 would validate the bearish engulfing candle and open the doors to retest of recent lows near 1.11. On the higher side, a daily close above the 100-day MA, currently at 1.1273 is needed to revive the bullish outlook. 

As of writing, the pair is trading at 1.1230, representing little change on the day. 

Focus on the ECB

• ECB Preview: Three things that may tilt EUR/USD to the downside

The European Central Bank is widely expected to keep key policy tools unchanged. 

The central bank has little room to sound hawkish, courtesy of escalating trade tensions, resulting fears of recession, slowdown in Germany and lingering Brexit uncertainty,

That said, the German economic slowdown and the anemic consumer spending across Eurozone is generally accepted by now and may have been priced in by markets. 

So, potential downward revision of the inflation and growth forecasts and dovish comments by ECB’s Draghi may have little impact on the EUR.

However, the shared currency may take a hit and settle below 1.1220 if the ECB pushes out rate hike pans to the spring or summer of 2020. Also, a bigger-than-expected downward revision of inflation forecasts could weigh over the EUR. 

The talk of new loans programs beyond TLTRO, if any, could also influence the EUR pairs. 

The shared currency may drop below the key support at 1.1220 ahead of the ECB if Eurozone’s first quarter gross domestic product and jobs data for the first quarter, due at 09:00 GMT, disappoints expectations. 

Technical Levels