EUR/USD once again closed above the daily triangle formation last week, leaving a huge bullish pin bar despite the surprisingly positive employment reports from the US. The pair is poised for more upside rallies but investors are seen cautious ahead of the European Central Bank (ECB) monetary policy which is due this week. The market sentiment remains extremely bullish due to repeated Higher Highs and Higher Lows in the recent waves.
As of this writing, the pair is being traded near 1.3875. A support may be noted near 1.3853 that is the trendline resistance turned support as well as 61.8% fib level. A break and daily closing below the trendline will push the shared currency again into bearish territory, validating a fall towards the 1.3800 support area as demonstrated in the following chart.
On the upside, the pair is likely to face a hurdle near 1.3896, the 76.4% fib level ahead of 1.3905, the swing high of the previous wave. The pair is expected to hold a tight range ahead of the ECB monetary policy meeting.
ECB Monetary Policy
The ECB is due to release the monetary policy on Thursday. According to many analysts, the central bank is likely to keep the benchmark interest rate unchanged at 0.25% this time around; however the bank might announce some unconventional monetary policy instrument such as the Quantitative Easing (QE) or negative deposit rate to cope with the falling inflation during the last few months. An exercise of the unconventional instrument might incite huge selling pressure in the EUR/USD, opening doors for a deeper correction below the 1.3500 handle.
Keeping in view the overall technical and fundamental outlook, selling the pair on a daily closing below the trendline support appears to be a good strategy; the trade however should be stopped out on a close back above the trendline.