EUR/USD could break out of the 1.0660-1.0760 range depending on the ECB's tone

EUR/USD has been fluctuating in a very tight range above 1.07. Today, the European Central Bank (ECB) will announce policy decisions and release updated economic projections. ECB's rate hike guidance could trigger a significant reaction in the pair, FXStreet’s Eren Sengezer reports.

Euro defines levels for ECB-fueled breakout

“In case the policy statement shows that the majority of policymakers lean toward a 50 bps rate hike in July, this could be seen as a bullish development and provide a boost to the euro. On the flip side, a cautious rate hike outlook with the bank not entertaining the idea of double dose increases could cause the shared currency to suffer heavy losses against the dollar.”

“If the bank sees a significant risk to growth in the remainder of the year, the euro is likely to lose interest. A softer inflation forecast, however, should help EUR/USD gain traction.”

“1.0680 (100-period SMA on the four-hour chart) aligns as interim support for EUR/USD ahead of 1.0660 (static level). In case the latter support fails on a dovish ECB tone, this could be seen as a bearish development and attract sellers.”

“On the upside, a four-hour close above 1.0760 (static level) on a hawkish ECB policy outlook could open the door for an extended rally toward 1.0780 (the end-point of the latest uptrend) and 1.0800 (psychological level).”

See – ECB Preview: Forecasts from eight major banks, ready for lift-off