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EUR/USD ends three-day winning streak, ahead of critical ECB meeting

Published 09/02/2015, 05:19 PM
Updated 09/02/2015, 05:23 PM
The euro fell sharply against the dollar by more than 0.75% on Wednesday

The euro fell sharply against the dollar by more than 0.75% on Wednesday

Investing.com -- EUR/USD fell sharply on Wednesday halting a three-day winning streak, ahead of a critical meeting of European monetary policy officials on Thursday that could provide signals on the long-term direction of inflation throughout the zone.

The currency pair wavered between a low of 1.1217 and a high of 1.1320 on Wednesday before settling at 1.226, down 0.0090 or 0.80% on the session. EUR/USD has fluctuated wildly in recent sessions, trading in between a range of 1.10 and 1.17 since August 17. Over the last month of trading, the euro is up by nearly 2.25% against the dollar.

EUR/USD likely gained support at 1.1044, the low from Aug. 10 and was met with resistance at 1.713, the high from Aug. 24.

A number of currency traders appeared reluctant to make any major moves during Wednesday's session ahead of a meeting of the European Central Bank's Governing Council on Thursday afternoon. Investors could be looking from signals from ECB head Mario Draghi on the viability of the bank's €60 billion a month quantitative easing program, which was launched in March. Previously, the ECB was on course to extend the bond-buying program through September, 2016 before a wave of economic shocks in China and soft commodity prices rattled global markets in recent weeks.

In August, inflation in the euro zone inched up by only 0.2% on a yearly basis, far below the ECB's targeted goal of 2%. During its last long-term estimate in June, the ECB forecasted inflation to reach 1.8% in 2017. If the ECB signals that it could continue the bond-buying initiative beyond next September, it might provide indications that it expects inflation to remain lower over the next several years.

In the U.S., analysts are bracing for a relatively weak U.S. jobs report for the month of August after forecasts from the ADP Research Institute fell sharply below consensus estimates on Wednesday. In its National Employment Report, ADP estimated that U.S. non-farm payrolls increased by 190,000 in August, significantly under estimates of a 210,000 gain.

The U.S. Bureau of Labor Statistics will release the August jobs report on Friday morning. In July, U.S. private payrolls increased by 215,000 as the unemployment rate remained steady at 5.3%. A soft reading on Friday could convince the Federal Reserve to delay a potential interest rate hike beyond September.

Meanwhile, former ECB head Jean Claude-Trichet defended the role of central banks throughout the world in soothing global markets. Speaking in an exclusive interview with CNBC, Trichet described major central banks such as the ECB and the Federal Reserve as "anchors of stability," in helping stave off recessionary headwinds.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.5% to an intraday high of 95.97, before closing at 95.92 . The index is still down by more than 1.5% over the last month.

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