EURUSD and EURCHF, H1 and H4
The Dollar slipped following the mix of data out of the US, where Jobless claims were in-line, Durable Goods orders were light of expectations, and the Advance Trade deficit was wider than consensus forecast. USDJPY pulled back a few points to 110.97, while EURUSD edged up to 1.1730 before drifting below 1.1700 due to ECB Draghi’s press conference. President Draghi added further pressure to the Euro against the Dollar, Swiss Franc and the Yen.
During the press conference EURUSD dropped to intraday lows of 1.1686, as ECB’s Draghi appears to be fine with a September, 2019 first rate hike. The pairing remains above Wednesday’s lows. The next Support level is set at the 200-period SMA at 1.1670, while the 200-period MA along with Wednesday’s low which also coincides with the 50% Fib. level set since July 19, have been providing a strong Support area for the pair the past 6 days. A breakout of this area along with the bearish triple top formation at the 1.1740-45 peak area, suggest that EURUSD is likely to swift from bullish to bearish outlook in the medium term.
Meanwhile, EURCHF is one of the big losers so far today, as it dropped by 30 pips from the day’s peak, reverting almost all yesterday’s gains. The next immediate Support area holds at 1.1600-1.1592. On the upside only a swing above PP level at 1.1620 could imply to a retest of Resistance at 1.1635.
ECB Details:
ECB doesn’t see the need to clarify “summer” in the guidance, with Draghi saying that the guidance has been effective in bringing survey and market expectations in line with what is expected, so it seems the central bank is happy with expectations for a move in September next year. Asked about the central bank’s decision to stick to negative rates while the Fed continues to hike, and the weak EUR, Draghi re-iterated the ECB’s official line that the exchange rate isn’t a policy target while pointing out that the EU has appreciated considerably over the past 12-18 months. ECB reinvestment policy wasn’t discussed today, so we won’t get any clarification on possible tweaks or a shift towards the longer end of the curve, although Draghi stressed that the capital key will remain effective in the re-investment schedule.
Meanwhile, ECB is slightly more confident on growth, inflation. President Draghi said the economy is proceeding along a solid, broad based growth path, even though uncertainties, especially related to trade, remain prominent. Significant monetary stimulus remains necessary and this will be provided by the remaining net asset purchases and re-investments and the ECB remains ready to adjust all instruments if needed. Latest data stabilized according to Draghi and point to ongoing growth, with ECB’s policy continuing to underpin domestic demand. The statement sounds relatively confident on the outlook, with broadly balanced risks, although Draghi admitted that the risk of heightened market volatility needs monitoring and that global uncertainty and the threat of protectionism remains prominent. At the same time there was a slightly more confident assessment on inflation, which was already evident in the introductory statement and Draghi said that the uncertainty surrounding the inflation outlook is receding and underlying inflation is expected to pick up toward the end of the year and move gradually higher in the medium term. So a confirmation of ECB’s decision to phase out QE and net asset purchases, but not a sufficient shift to bring forward rate hike path.
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Andria Pichidi
Market Analyst
HotForex
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