EUR/USD hit a new high as the market buys into next week's "live" ECB meeting for taper discussion, but the path is far from clear for bulls. The rally might extend beyond 1.1850/55 resistance ahead of the meeting and even reach the 200-Day SMA or 1.2030/40 resistance but long positions held ahead into the meeting might have to quickly be cut if the ECB doesn't deliver on expected taper discussions.
The ECB is likely to maintain a very cautious tone as tensions from trade, Italy and slower growth remain.
Aside from those factors, the ECB will be making new forecasts and the recent disappointing data prints could have those projections looking dimmer than prior forecasts.
The key forecast of core inflation, which excludes energy prices, remains stubbornly below where the ECB desires it to be.
Slowing economic growth and anemic inflation is likely to keep ECB projections from changing much from prior forecasts.
If the meeting shows no signs of taper discussions and robust projections, EUR/USD likely erases recent gains and a return to May's low or lower is possible.
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