The EUR rose against the U.S. Dollar yesterday, but gains were capped ahead of the European Central Bank's (ECB) policy meeting today when the central bank is expected to cut interest rates by a quarter percent to 1.00%. The central bank may also announce other monetary policy measures to stimulate lending and growth. The EUR gained against the USD as the pair closed at 1.3320.
Last month the ECB reduced its target rate to 1.25% in order to stabilize the economy. These days, Europe faces the most danger from debt reduction, depression, and deflation, and from their excessive debt and deleveraging. As a result, the ECB will likely cut its interest rates today while other governments embark on state-sponsored investment programs. The market will view the ECB action of a rate cut as a step to restore investor confidence, and to mitigate the economic fallout from the financial crisis.
Investors may look for the unusual price volatility to continue in the EUR/USD as the pair attempts to stabilize and find new support and resistance lines. Large price jumps such as these are not common place and present terrific opportunities to take advantage of the price swings for large profitable gains. If the rates are indeed cut, a target near 1.3000 wouldn't be unreasonable for next week.