In approximately 5 hours, the European Central Bank will release its Monetary Policy Statement for the Euro. This is a significant announcement not only for Euro holders, but also for U.S. investors, as the EURUSD pair holds over 60% weighting on the DXY.

According to 82 economists polled by Reuters, a cut of 25 basis points is expected, bringing the rates down to 4.25%. This should logically bring EURUSD lower due to a decrease in interest rates.

There is a chance that despite the cut, EURUSD could rise as markets have already priced in the lows. Alternatively, if the ECB holds or raises interest rates, EURUSD should gain strength – allowing it to test the top of its weekly symmetrical triangle around $1.0990.

Short Term Resistance Overhead

Going down to the 4H time frame, we can see EURUSD falling back below its previous high formed in May. Coupled with the ECB announcement, if EURUSD cannot reclaim this level, we may see some downside for the asset until the Fibonacci retracement support at ~$1.0793.

In that scenario, EURUSD would effectively be forming a range. However, in the event EURUSD does start to rise higher, we may see a test of the upper trendline on the triangle (~$1.0990).

Although EURUSD has been grinding higher, the ADX has shown waning momentum since late May. Therefore, we must acknowledge the possibility of a minor correction on a news day such as today.

So, what does this all mean in the grand scheme of things?

Our head analyst, Jeremy Wagner, published an Elliot Wave Analysis on EURUSD back in April, where he pointed out that EURUSD could eventually see a rise to ~$1.13000.

So, even though we must stay vigilant in the short term for any downside movement, the overall bias is still bullish. Today is a high impact news day, so it may even be a good idea to stay out of the markets, grab yourself a coffee, and take the day off.