EUR/USD which had been in a strong downtrend over the past couple of days has shown first signs of a bounce back from lows on back of news that Russia and Ukraine had agreed to a ceasefire bringing down the escalation tensions between the two nations.
Traders believe that further sanctions would not be imposed on the Russian economy if the ceasefire conditions are met which in return would not affect the growth in the eurozone economies, broadly seen as a huge positive for the euro.
Though the gains were kept in check as most traders and investors are closely watching the European Central Bank meeting on Thursday to understand if the ECB would introduce any kind of quantitative easing to stimulate the eurozone economy. The introduction of any style of easing is being seen as a huge negative for the euro in the near term.
On the hourly charts for the currency pair, the euro hit a session low of $1.31 before surging back above the $1.32 where it ran into resistance and retracing back. The currency pair currently trades just near its 100 day moving average which is at $1.31461 level which is being seen as support. If the currency pair break the 100 day moving average it would be seen as a huge positive.
The momentum indicator for the EUR/USD has shown first signs of breaking above the bearish territory and has given a buy signal. The relative strength index has also given a fresh buy signal which is indicative of buying interest returning for the EUR/USD. But as traders are cautious before the ECB meeting, the gains on the upside can remain capped.
Short EUR/USD if it falls below $1.31461 for a near term target at $1.3070 with a strict stop loss at $1.316.