Investors are now looking ahead to the meeting of the European Central Bank

The dollar holds steady today, retaining a modest bullish bias as risk sentiment looks mixed this week, with the euro being capped by the 1.1885 area, trading marginally lower on the day despite stronger-than-expected economic data out of Germany. Industrial output increased by 1.0% on the month after a revised decline of -1.0% in June versus +0.9% expected.

Meanwhile, German ZEW economic sentiment arrived at 26.5 in September, down from 40.4 previous. The current situation index came in at 31.9 versus 29.3 in August. The Eurozone ZEW economic sentiment for September slumped to 31.1 as compared to the 42.7 previous and 52.2 expected. Separately, Eurozone’s second-quarter GDP growth was revised up to +2.2% QoQ and to +14.3% YoY.

It looks like traders shrugged off mixed data as the pair continued to tread water in a tight range ahead of the European Central Bank meeting. As such, the EURUSD pair is holding above the 1.1860 area, being stuck within a tight trading range amid low trading volumes.

Later in the week, the common currency would be affected by the outcome of the ECB meeting due on Thursday. The central bank is expected to debate when to withdraw bond purchases. A hawkish tone could send the euro higher across the board. In this scenario, EURUSD would regain the 1.1900 figure which capped bullish attempts late-last week.

On the downside, if the 1.1855 region gives up in the short term, the 1.1830 area will come back into market focus, followed by the 1.1800 figure and a slightly ascending 20-DMA, today at 1.1778. As long as the pair stays below the 1.1900 handle, downside risks continue to persist in the short term.


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