According to analysts from TDS, the tepid reaction to today’s ECB meeting reinforces their view that familiar ranges will prevail in the EUR/USD pair for the foreseeable future. They noted, Draghi opened the door to further easing and with that, “he has opened the door to a renewed push lower if our bearish scenario materializes.”
Key Quotes:
“We continue to target 1.14 for our end-Q2 EURUSD forecast. All else equal, we would revise this lower if the Euro area’s growth outlook deteriorates or trade tensions escalate. We are less comfortable with our year-end target of 1.19 and path beyond at this stage, however. The ECB’s “lower for longer” message could mean a similarly uninspired trajectory for the currency. If the shorter-term risks are lower for EURUSD, the medium-term ones may be relatively flat compared with current levels. At longer horizons, however, we continue to see a broad USD depreciation.”
“We are focused on the 55-DMA currently at 1.1311. This corresponds quite closely with the 1.13 (+/-) pivot zone that has anchored the range in EURUSD since late last year. More broadly, we think would need to see a daily close below 1.1175 or above 1.1450 to consider if a larger directional move was afoot.”
“A push lower seems like the more likely possibility at this stage. A push well below 1.1175 would put a test of 1.1120 into view. A break lower from there could next see a challenge of support at 1.1020/25. Beyond that, we think investors would look for a probe down to 1.0820 – the “melt-up” level established after the first round of the French Presidential election in April 2017.
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