By Michael Baker

Another ECB meeting is upon us and there is a real sense of anticipation for this one as we draw ever closer to the end of the asset purchasing program. Previously the council has stated that the pace of purchases will continue at £30 billion until September 2018. The objective of these purchases is to bring inflation below, or close to, 2% over the medium term.

Recent inflation data released by Eurostat showed a large uptick in annual inflation to 1.9% in May from 1.2% in April 2018. Energy saw the highest rate in May, up 6.1% compared with 2.6% in April according to the release. However, stripping out energy, unprocessed food and tobacco leaves us with a milder 1.1 %.

No matter how these figures are presented it will be difficult to shake the lingering doubts in regard to the Italian political system and economy. With September not too far away these factors give the ECB something to think about. Could we be getting confirmation that the programme will draw to an end?

EURUSD recently found resistance in a strong zone of price action which held as support on the 9th May, and after the break held the market on May 16th, 17th, 18th and 22nd. This area sits just below the 38.2% Fibonacci retracement of the recent swing down from April 17th. The market has come off from here after a pullback from the recent drops. Are we just taking a breather or will we break below 1.1712? If so this could leave us open for 1.1657/40 and then the yearly lows.


A Brief Recovery After Tanking During April & May


 ETX-Chart-ECB-June-2018
Source: ETX Capital


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