EUR/USD targets 1.2040 after the ECB interest rate decision

The EUR/USD rose after the latest European Central Bank (ECB) interest rate decision. The pair is trading at 1.1947 and is in its third consecutive day of gains. 

ECB decision

The ECB concluded its two-day interest rate decision today. As widely expected, the bank left the deposit facility rate unchanged at -0.5%. It also left the marginal lending facility at 0.25% and the interest rate at 0%.

In its policy statement, the bank said that it will continue its pandemic emergency purchase programme with the total ceiling being at 1.85 trillion euros. However, the bank noted that it could increase the pace of purchases in the next quarter to help support the economy. Further, the bank said that it will continue the 20 billion euro monthly purchase under the Asset Purchase Programme (ASP). The statement said:

“Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon.”

The ECB decision came at a time when many European countries are starting to see robust growth as lockdowns end. Last week, data from the region showed that the manufacturing PMI increased to above 50 while the services PMI is improving.

The EUR/USD is also rising because of the overall weak dollar as inflation risks ease. Data by the US statistics agency showed that the headline CPI increased by 1.7% last month while core CPI rose by 1.4%. This increase was in line with expectations. As a result, bond yields, which were previously rising have started to ease. 

EUR/USD technical analysis

The two-hour chart shows that the EUR/USD price has been on an uptrend in the past few days. The pair has moved above the important resistance at 1.1916, which is also the neckline of the inverted head and shoulders pattern. The current level is also important since it was the lowest level on February 5. Therefore, there is a possibility that the pair will keep rising as bulls target the 50% retracement level at 1.2038. You can trade this price action using one of these high leverage forex brokers.