EUR/USD (a 4-hour chart)
The strong falling of the EUR/USD from 1.3655 to 1.3490 at the beginning of this week we tend to consider not as a reversal of the upward trend but rather a correction after the strong growth in the previous two weeks. Any long-term forecasts we would prefer to do after the ECB meeting the next Thursday.
We believe that the consolidation of EUR/USD at current levels or trading in a narrow price range is the most likely scenario for the pair.
Many traders are really concerned about the fact that in the nearest future interest rates may be reduced. That reduction can be caused not only by a high rate of the euro but also the fact that early LTRO payments boosted rise of rates.
Indirectly, pessimistic quarterly survey on lending also may influence accepting this decision.
Another reason is the inflation (CPI) that go down in the coming months and the current statistics, which, presumably, will point to the drop in the index PMI Services in Europe to 48.2 in January, and the decline in retail sales in the region in December by 0.5%.
In general, sales of EUR / USD on Monday - this including an attempt to discount the risks associated with the forthcoming meeting of the ECB. "Sell on expectations, buy on the fact."
an agreement on the budget 2014-2020, which in time could put pressure on the euro.
Overall, in the base case scenario for FX we believe that if the ECB meeting on Thursday will be held, as in January, in a neutral manner, without allegations that the high euro hurts euro-zone economy, or that the payment LTRO negative impact on the European interbank market, then we may see the return of buyers to the EUR/USD exchange rate and growth in the area of local maxima in 1.37.