Analyzed by:Mr.Thibault Moirez,Independent Analyst

The EURUSD continues to trade flat at a bearish bias on Friday despite the ECB's dovish tone on Thursday which should have alleviated the selling pressure on the pair.

The European Central Bank pledged last week to maintain a "persistently accommodative" policy until its 2% inflation target is reached on a sustainable basis. In addition, Christine Lagarde stressed that the rebound in the epidemic posed a risk to the economic recovery.

Forex traders seem to be waiting for the Fed's meeting next week before taking a position on the direction of the EURUSD. Market participants are still very divided on the upcoming FOMC meeting, with some expecting members to announce a future reduction in the pace of asset purchases while others expect a simple standstill.

It is still unclear which path the Fed will take at present, what’s certain however is that this gridlock has kept traders holding on to their cards.

As we await the Fed next Wednesday, currencies could potentially react to Markit's preliminary PMI releases in the first half the of week. The PMIs will give advanced indications on inflation and the labor market in Europe and the US.

In terms of technical analysis, the EURUSD is consolidating in the short term on its long-term bullish oblique, which passes through the lows of last November and March, and in its bearish wedge.

A weekly close below this oblique would be a bearish signal for a continuation of the EURUSD's downtrend, while a breakout from the top of the wedge just below 1.18452 would support a rebound to $1.20.

In the short term, the Bollinger Bands on the daily time frame may help indicate direction. An upward breakout would favour the bullish scenario up to 1.20 while a downward breakout would favour the scenario of a continued decline towards the immediate resistance at April’s low at 1.17041.

EURUSD traders could contemplate entering short positions riding the downward wave towards the 1.17158 level in the run up to next Wednesday’s Fed meeting. Given the previous months trading pattern, we can expect a rebound at that level barring any negative surprises.

Support & Resistance Levels:

R3       1.22530

R2       1.20000

R1       1.18750

S1        1.17158

S2        1.16380

S3        1.14500

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