The Draghi roller coaster is in full speed: after refraining from saying anything new in the prepared statement and sending EUR/USD only 8 pips from 1.40, Draghi sends the euro down.
EUR/USD is falling all the way from a peak of 1.3992 to below 1.39 and the move continues. The stops around 1.40 were hunted. Looking only at EUR/USD price, we got a test of resistance that resulted in a rejection and strong move to the other direction.
Here is how it looks in the 5 minute chart:
Draghi made it clear that data is needed to confirm the worries, but he also said that the ECB is not “resigned to accept low inflation”. Is the data just a rubber stamp? Has the ECB made the decision? The market certainly accepts this.
Support was met at 1.3894. Further support awaits at 1.3830, followed by 1.38.
It’s hard not to suspect that this heavy hint is part of a tactic to talk down the euro and that the threat to act is just a small version of the OMT: presenting a big bazooka that makes real action unnecessary.
The headline of the ECB preview was a small step to weaken the euro? – Indeed, Draghi weakens the euro. His tool is verbal.
Update: EUR/USD dips below 1.3894.
Draghi certainly raises the expectations for June. In an extreme scenario, these expectations bring down the euro so strong that inflation rises strongly in May and consequently allowing the ECB not to act again, but inflation will likely not have enough time to rise.
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