- EUR/USD met dip-buyers in the 1.1120 region.
- ECB left rates unchanged at today’s meeting.
- Draghi reiterated risks to the outlook remain on the downside.
After bottoming out in the 1.1120 region earlier in the session, EUR/USD has managed to regain some shine and its now back to the 1.1130/40 band.
EUR/USD remains volatile above 1.1100
The pair keeps the erratic performance in the second half of the week, always above the 1.1100 mark so far and keeping track of USD-dynamics and headlines from the US-China trade front and the Brexit process.
In the meantime, and at his last meeting as President of the ECB, Mario Draghi reiterated the region’s outlook keeps facing prominent downside risks against the backdrop of muted inflation. On the latter, Draghi suggested the underlying inflation is expected to pick up in the medium term.
He once again asked governments with fiscal space to step up and intervene in a timely manner, while the central bank remains ready to adjust all instruments if needed.
In addition, spot is also deriving some upside pressure on the miserable prints from US Durable Goods Orders, which contracted at a monthly 1.1% in September, of course below estimates.
Earlier in the day, German and EMU advanced PMIs noted the slowdown in the region has intensified further this month.
What to look for around EUR
The upside momentum in the pair has extended to the 1.1180 region earlier this week, where it met some strong resistance and sparked a correction lower to the area below the key 100-day SMA. Despite the rally in spot has been exclusively sponsored by weakness in the Dollar, the outlook in Euroland remains fragile and does nothing but justify the ‘looser for longer’ monetary stance by the ECB and the bearish view on the single currency in the medium term at least. In addition, the possibility that the German economy could slip into recession in Q3 remains a palpable risk for the outlook and is expected to weigh on EUR in the short/medium term horizon.
EUR/USD levels to watch
At the moment, the pair is gaining 0.17% at 1.1149 and faces the next up barrier at 1.1171 (monthly high Oct.18) seconded by 1.1186 (61.8% Fibo of the 2017-2018 rally) and finally 1.1203 (200-day SMA). On the other hand, a breach of 1.1106 (low Oct.23) would target 1.1046 (55-day SMA) en route to 1.0925 (low Sep.3).
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