The forex market before the highly anticipated ECB meeting

EUR/USD

EUR/USD found support at 1.0800 area. This level coincides with the bottom line of Bollinger. Figures "hammer" and "doji" were formed, they show that the downward trend loses power and goes to a neutral state. The bullish candle from last Thursday shows that it sarts a correction of the downward movement, started from 02.11.2016. The first immediate resistance for the ongoing rise is in the zone of 1.1060. This level from support has become resistance and if the price overcomes it, next resistance level could be expected at the upper line of Bollinger and the previous peak. We must not forget that for a resistance price can serve the round levels of 1. 1100; 1.1200; 1.1300.

If the price has found resistance because it is very close to the level of 1.1060 and a decline starts, we can expect a retest of the bottom of last Thursday.

We expect Thursday full of important news, when there will be a press conference of the ECB and the decision on key interest rates. The main indicator that tracks the ECB is inflation, and it fell to minus 0.20 percent. Therefore, most market participants believe that we will see additional incentives.
It is interesting what they will be, such as extension of the terms and volume of purchase of assets and/or further reducing the deposit rate.

Here we have two options - Mario Draghi may surprise or disappoint market participants. In the first scenario we will witness more robust than expected actions of the ECB. This will lead to a decline in the currency pair.

In the second scenario Draghi will announce anticipated by market participants changes. They may not be deemed sufficient (because they are already calculated in the price), and it will disappoint participants. Last time when Draghi disappointed market participants was on 03/12/2015, and EUR/USD climbed four figures throughout the day.

Both options will lead to increased volatility. This is a prerequisite to be careful on Thursday.