- Euro drops across the board after the European Central Bank meeting.
- EUR/USD heads for second loss in-a-row and lowest close since August 15.
The EUR/USD dropped sharply following the ECB meeting and Draghi’s press conference. It bottomed during the US session at 1.1359, the lowest level since mid-August. The euro failed to recover and remains under pressure, near the lows, looking at 1.1350.
The ECB left monetary policy unchanged as expected. Draghi said the economy continues to expand broad-based but also mentioned that the latest data was “weak”. Regarding inflation, he said they are expecting underlying inflation to pick up towards the end of the year.
“Today’s message underlines that it is still far too early for the ECB ‘normalisation’ path to provide more broad-based support to the single currency: we are simply too far away from the point in time when rates could possibly be raised for the FX market to care”, said analysts at Danske Bank. They see EUR/USD heading for a test of the 2018 lows and more broadly to be range-bound around 1.15 ahead of year-end.
The move to the downside was also triggered by a stronger US Dollar versus European currencies. The US Dollar Index reached at 96.66, the highest since August 16. Against emerging market currencies the US dollar is retreating today, on the back of an improvement in risk sentiment.
EUR/USD Levels to watch
To the downside, the immediate support is seen at 1.1350, followed by 1.1325 (Aug 14 low) and 1.1300 (psychological). On the flip side, resistance could be located at 1.1375/80 (Oct 24 low), 1.1420 and 1.1435 (Oct 18 low, Oct 25 high).
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