Ahead of tomorrow’s ECB meeting, the markets don’t expect any changes in the current program, so the focus will be on Draghi’s rhetoric, potential changes to the forward guidance and possible comments on the currency’s strength. The latter is going to be the key issue for euro bulls, as any sign of Draghi’s verbal interventions may drag EURUSD down.
However, even in such circumstances, the overall will stay intact, and the potential correction will open new opportunities for reentering the market with new EUR longs. At that, the scale of a retreat will depend on the regulator’s tone on other issues including the prospects of adapting its forward guidance in the coming month.
The healthy euro area economic fundamentals don’t apply any “dovish comments” on this front, therefore, the downside risk for the pair is limited anyway. A pullback under the 1.23 mark, which is now the immediate support, will open the way to the 1.2180 area, where buyers may emerge.