Draghi drops the bomb: “comfortable to act next month” –

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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:

EURUSD rises and falls May 8 2014 on the Draghi heavy hint for ECB acction in June

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.

For more levels, events and analysis, see the euro to dollar prediction.

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About Author

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 the 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.

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