EURUSD - Can the ECB Kickstart FX Volatility?Euro vs US DollarPEPPERSTONE:EURUSDPepperstoneEURUSD has been trading in a relatively tight range so far this month, moving between a low of 1.1376 seen on July 14th and a high of 1,1483 touched on July 15th. The lack of volatility could be put down to drifting differentials between the ECB and Fed interest rate outlooks, which have been impacted equally by the changing geopolitical environment in the Middle East, as the Iran Conflict evolves from an agreed ceasefire, to escalation and a resumption of hostilities, which have pushed energy prices back up to levels seen in early June. Perhaps unsurprisingly against this backdrop, EURUSD prices are currently trading at 1.1425 at the time of writing (0645 BST), slap bang in the middle of the July range! However, FX volatility could pick up later as the ECB announce their next interest rate decision at 1315 BST, and then ECB President Christine Lagarde holds her usual press conference at 1345 BST. The current expectation of analysts and economists seems to favour the ECB keeping rates on hold to consider the impact of war in the Middle East, so anything else may be seen as a major surprise. If the consensus is correct, EURUSD volatility could pick up when Madame Lagarde starts to comment in the press conference on the outlook for Eurozone growth and inflation, surging energy prices and whether market expectations for a further rate hike in September are reasonable or off base. In an environment like this, where a major event looms at a time of constricted volatility, the potential for surprises which may lead to outsized directional moves can increase, so keeping apprised of the latest technical setups and levels to monitor ahead of time could be useful preparation. Technical Update: Will the Current Downtrend Continue or Reverse? As we approach the ECB rate announcement (1315pm BST) and press conference (1345 BST), traders could be wondering how EURUSD will fare and if the potential for increased price volatility may see a more extended phase of price movement. Looking at the chart below, it appears as if more negative sentiment has been evident since the January 27th high (1.2082), where any price recovery has failed below the previous recovery peak, and has then been followed by selling pressure strong enough to break below the previous price low. This is the basic definition of a downtrend. Of course, just because there has been negative sentiment in the run-up to the latest ECB decision, doesn’t mean it will continue after. The reaction to today’s news could just as easily see price strength emerge again, so being aware of both key support and resistance levels may prove useful to help determine where the next directional themes could lie. Potential Resistance Levels: Against a negative sentiment backdrop and a pattern of lower price highs, traders may focus on the last failure high as the first potential resistance area. In the case of EURUSD, the last high stands at 1.1483, posted on July 15th, and closing breaks above this level may be required to open the possibility for positive momentum emerging again. If 1.1483 were to give way on a closing basis, attention could shift toward 1.1525, which is the 38.2% Fibonacci retracement level. A closing break above 1.1525 may then open scope toward 1.1586, the higher 50% level and possibly even 1.1648, the 61.8% retracement. Potential Support Levels: In terms of key support levels to monitor, the most recent price low from which attempts at strength have developed is 1.1376, registered on July 14th.