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At the start of today's European session, DXY dollar index futures are traded at today's open and yesterday's close, remaining in a tight range around 106.54 mark. Traders have so far avoided opening large deals on the eve of tomorrow's ECB meeting, also hoping to see and catch strong movements in the market tomorrow, while the EUR/USD pair is traded in a narrow range near yesterday's high and the local resistance level 1.0275.
It is expected that following the results of tomorrow's meeting, the ECB, for the first time in the last 11 years, will raise its interest rates by 0.25%. But there is also an opinion that the bank's management will go for a more decisive tightening of monetary policy in the face of accelerating inflation, which reached 8.6% (in annual terms) in June. There is a forecast that the ECB will raise its interest rates by 0.50% and may announce further increases at the next meetings.
But there are also reasons to believe that EUR/USD will again test the 1.0000 level, especially if tomorrow's ECB decision on its monetary policy will disappoint market participants. The press conference following the ECB meeting will also be of great importance, during which a surge of volatility is possible not only in euro quotes, but also in the entire financial market. If the tone of statements is regarded by market participants as soft, then this will have a negative impact on the euro, which may move well below parity with the dollar.
In an alternative scenario, EUR/USD will break through the local resistance level 1.0275 and rapidly head "north". But here, too, the pair needs to break through the resistance levels 1.0430, 1.0485 in order to continue growing towards the key resistance levels 1.0780, 1.0925.
Recall that the decision of the ECB on rates will be published tomorrow at 12:15 (GMT).
