ECB Bank Sign. Image source: Gideon Benari © 123RF.com
The ECB did not join the latest wave of increasing global hawkishness, which was initiated by the FED and especially the BOE. Nevertheless, the euro continues to surge following ECB's December policy decision. Read more about the current investors' sentiment from our latest overview of the stock market.
Christine Lagarde, Chair of the ECB, and her colleagues from the Governing Council expectedly decided to maintain the near-negative Main Refinancing Rate unchanged at 0.00 per cent. Meanwhile, the euro extended its gains against the greenback.
EURUSD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
As shown on the 4H chart above, the EURUSD has started developing a new uptrend, following a decisive breakout above the Bullish Pennant. This is a type of pattern that, when found at the bottom of a preceding downtrend, underscores a likely bullish reversal.
Having broken out above the Pennant's upper limit and the 23.6 per cent Fibonacci retracement level at 1.13075, the price action is currently headed towards the 38.2 per cent Fibonacci at 1.13812. The rebound occurred from the crossover between the 100-day MA (in blue) and 50-day MA (in green).
Meanwhile, the 200-day MA (in orange) recently crossed below the 38.2 per cent Fibonacci, making it a more significant resistance level. This is where a temporary bearish correction could be initiated.
ECB shows restrain amidst elevated inflation in the Eurozone
Eurozone Headline Inflation Rate. Image source: TradingEconomics.com
In its monetary policy statement, the Council expressed the need to preserve an accommodative stance as the underlying recovery remains tentative across the Euro Area.
"The Governing Council judges that the progress on economic recovery and towards its medium-term inflation target permits a step-by-step reduction in the pace of its asset purchases over the coming quarters. But monetary accommodation is still needed for inflation to stabilise at the 2% inflation target over the medium term."
This decision is somewhat diverging from the mounting hawkishness of central banks elsewhere, chiefly the Federal Reserve in the U.S. and the Bank of England.
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