From a technical perspective, there’s not much in it in terms of EUR/USD price action at the moment. The pair looks to be caught in a bit of a consolidation phase in anticipation of the ECB meeting this week – after having seen the dollar retracement bounce stall at the 38.2 Fib retracement level at 1.0787.

Since then, there hasn’t been much direction as we also see more of a push and pull mood in the bond market and equities alike. But the ECB could be a catalyst for a move in the euro at least today, one way or another.

I mentioned here that the bar for any hawkish surprise is rather high and that will be a tough condition for the euro to bank on in order to rally. Lagarde needs to deliver clear hints of a potential 50 bps rate move in July for that to happen and I reckon we could see EUR/USD pop through 1.0800, all things being equal.

That said, with markets already pricing in ~130 bps worth of rate hikes through to year-end by the ECB, one can argue that any upside may be more limited especially if economic conditions worsen in the months ahead.

But barring any hawkish surprise, the euro might be set up for disappointment today. A drop back towards testing the lower bound of the consolidation range at 1.0627-42 will be a big test and if that gives way, we could be revisiting 1.0500 next.

This article was written by Justin Low at www.forexlive.com.