EUR/USD shoots to 1.3872 after ECB rate decision, eyes US job data

EUR/USD yesterday rallied to 1.3872 –more than 150 pips—after the European Central Bank (ECB) kept the cash rate unchanged at 0.25% amid better than expected inflation report in January and healthy growth outlook, the pair has halted the rally ahead of the US job data.

At the time of writing, the pair is being traded near 1.3860; immediate resistance can be noted around 1.3875 which is the channel resistance and then 1.3891 that is the swing high of December 27. A break and daily close above the December high shall open doors for more upside rallies towards 1.4000 i.e. an important resistance for the pair.

On the downside, the shared currency is likely to find support at 1.3795, the 76.4% fib level, ahead of 1.3732 that is 61.8% and then 1.3700 which is the channel support and the psychological level. A break and daily close below the channel support shall expose a dip towards 1.3630 or even below.

Yesterday, the ECB kept the interest rate steady at 0.25% on better than expected economic outlook. At the monetary policy press conference, ECB head Mario Draghi said that the policymakers intended to see at least one more inflation report before exercising some new monetary policy instrument. Some analysts had predicted negative deposit rate or quantitative easing announcement that kept EUR/USD under pressure. However, Euro bulls cheered when the ECB avoided any harsh policy measure.

Now investors are curiously waiting for the US job reports. Today the US labor department is due to release non-farm payrolls, jobless rate figure, trade balance, average hourly earnings, and average weekly hours reports. The data is considered a key gauge to assess the recent situation in the labor market. Later on March 18-19, FOMC policymakers will gather to analyze the January-February job reports before making any decision on the pace of bond purchases. 

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Usman Ahmed

Usman Ahmed is an individual forex trader and market analyst. He holds a Masters of Business Administration (MBA) degree. His work includes fundamental and technical reports on various currency pairs, commodity futures and stock markets. His technical analysis features price action strategies.

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