EUR/USD creeps higher above 1.19 ahead of ECB

After closing the previous day above the 1.19 handle, the EUR/USD pushed higher on Tuesday amid a weakening greenback and refreshed its 5-day high at 1.1950. As of writing, the pair was trading at 1.1940, up 0.2% on the day.

Pressured by the news of Stanley Fischer, Vice Chairman of the Federal Reserve, resigning from his positions effective mid-October, the greenback lost investors' interest, dragging the US Dollar Index below the 92 handle for the first time in a week. At the moment, the index was at 92.02, losing 0.28% on the day. 

• US Dollar plummets to fresh weekly lows below 92

The pair's price action on Wednesday seems to be driven by the DXY movements as investors are waiting for tomorrow's critical ECB meeting. Earlier in the day, the data from Germany showed that factory orders contracted by 0.7% on a monthly basis in July, missing the market consensus of 0.3% expansion, but was largely ignored by market participants. On the other hand, the relatively positive macro data from the U.S. failed to help the greenback gain traction.

• US: Goods and services deficit was $43.7 bln in July, up $0.1 bln from $43.5 bln in June
• US: Continued growth in the non-manufacturing sector at a faster rate - ISM
• US: August data signalled accelerated upturn in business activity across service sector

“With the stronger euro, the ECB is likely to be more cautious with its tapering communication. In fact, there are two options: either announce the details of a very dovish tapering starting January 2018, this week, hoping that full clarity restores calm, or strike a cautious balance between giving the first hint at upcoming tapering and adopting dovish tones, such as warning against unwarranted tightening of financial conditions in order to calm FX markets. As the ECB is probably not yet unanimous on the first option, we expect that Thursday’s meeting will again be about what Draghi did not say, rather than what he did," Carsten Brzeski, Chief Economist at ING, argues.

Technical levels to consider:

Although the pair is looking to close its third day in a row with gains, it's still early to assume an uptrend had started especially with the ECB meeting looming. 1.1900 (psychological level) could be seen as the first technical support for the pair ahead of 1.1850 (20-DMA) and 1.1780 (Aug. 24 low). On the upside, resistances align at 1.2000 (psychological level), 1.2070 (Aug. 29 high) and 1.2170 (Dec. 31, 2014, high).