Draghi Cuts the Rates – Euro Drops

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In his first decision as the president of the ECB, Mario Draghi decided to cut the interest rates  It wasn’t clear if a rate cut would indeed come or if Draghi would avoid this step in the first meeting.

EUR/USD dropped sharply in a knee-jerk reaction but regained some of its immediate losses. The pair already challenged the 1.3838 resistance line earlier in the day as hopes for a cancellation of the planned Greek referendum emerged and Greece’s government was on the verge of collapse. But now the pair is at 1.3770, after falling to 1.3740 in the immediate response.

The economic situation in Europe is deteriorating, and it’s not only the Greek crisis. The slowdown threatens to turn into a full blow recession. This is felt in the troubled countries but also in the core countries. On the other hand, inflation picked up its head once again and rose to 3%.

We soon have a press conference. See more details in the ECB Preview.

The market hadn’t expected this move, but it seemed clear to me that the current economic situation, together with the discussion of a rate cut in the previous meeting meant a rate cut already now. Another one in December certainly is on the cards.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.