Both and have been trading in tight price ranges given the onset of the summer lull, making it difficult for traders to profit from low volatile swings. Even technical price breakouts provided little follow-through as volatility ebbs.

However, today might be different with traders eyeing the U.S. and European Central Bank for clues on the direction of monetary policies. We brace for bigger market moves around the ECB decision at 11:45 UTC and the inflation report due at 12:30 UTC.
 
As for the inflation report, expectations are that even a little higher reading won’t change the Fed’s monetary policy path right now. Fed policy makers are in a wait-and-see mode and do not intend to surprise the market with premature policy changes at their next week. If there is, however, a significant higher inflation reading, taper talk is about to intensify with the soaring ahead of the Fed meeting.
  
The ECB is likely to follow the Fed’s lead and keep ultra-loose monetary stimulus in place. Neither the Fed nor the ECB is expected to slow the pandemic bond buying at their meetings this month. Economists expect policy makers to opt for another three months of the very accommodative monetary policy. Central banks could taper bond-buying in September at the earliest.  
 
In a nutshell, while we do not expect fireworks today, we brace for higher volatility that could provide profitable trading opportunities.    
 
EUR/USD: Bulls were unable to stabilize the pair above 1.22 ahead of today’s risk events. We will keep tabs on a significant break above 1.2250 in order to expect further gains. Above 1.2270, the next higher target is 1.2350. On the downside, if the euro breaks below 1.2130 and further 1.2090, we could see accelerated bearish momentum towards 1.1950.
 
GBP/USD: After the cable failed to hold above 1.42 the focus shifts to a break below 1.4090 that could lead to further losses towards 1.40. On the upside and following a renewed break above 1.42, a higher target is seen at 1.4280. How the pair will trade in short-term time frames could however mainly hinge on the greenback’s performance today. 

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