As expected, the European Central Bank (ECB) left its key policy measures on hold. President Lagarde noted that the impact of COVID-19 was fading and that the Governing Council spent most of its meeting discussing inflation. In the view of economists at TD Securities, EUR/USD is to test resistance near 1.1680 off the back of this.

Short-lived EUR pop

“As widely expected, the ECB had nothing on offer today and Lagarde reinforced that financing conditions will need to remain accommodative. And while they admit that inflationary forces will persist longer than expected, they remain confident – perhaps borderline arrogant – that price pressures will fade.”

“We think that there is some risk of EUR/USD testing 1.1680 resistance, but extrapolating beyond that seems like a big ask a week ahead of the Fed's meeting where tapering will be announced.”

“As much as we think there is scope to test 1.1680 resistance, this should be short-lived.”

“From a technical point of view, EURUSD momentum indicators suggest that price action is nearing fatigue above 1.16.”