- EUR/USD closed at the weakest level in over two years on Wednesday.
- Technical charts are calling a move to recent lows below 1.0930.
- EUR will likely pick up a strong bid if ECB’s Draghi sounds less dovish.
EUR/USD is operating on slippery grounds, having printed a weakest daily close in over two years on Wednesday, and could drop below 1.09 if the European Central Bank (ECB) President Draghi defends his recent decision to restart the bond-buying program.
The common currency on Wednesday closed on a weaker note at 1.0942 – the weakest close since May 2017 – as the American Dollar drew bids, possibly due to the rise in the US Treasury yields.
Notably, the US 10-year treasury yield rose nearly eight basis points despite a formal impeachment inquiry of the US President Trump. “While the markets fell at the onset, they quickly realized that the chance of Trump getting removed from office is extremely slim. Investors also liked what they saw in the reconstructed transcript of the Trump-Ukraine phone call,” BK Asset Management’s Kathy Lien wrote in her daily analysis.
On the defensive
With a close at 1.0942, the pair established a fresh lower high and lower low pattern on the daily chart. Key indicators like the 14-day relative strength index are also reporting bearish conditions. Further, Wednesday’s bearish marubozu candle indicates the path of least resistance is to the downside.
Technically speaking, a retest of the recent low of 1.0926 looks likely.
Focus on Draghi
ECB’s Draghi will deliver a speech at the European Systemic Risk Board annual conference in Frankfurt at 13:30 GMT.
The central bank cut on Sept. 19 cut rates by 10 basis points to 0.50% and announced a QE program, which will begin from Nov. 1.
The common currency will likely drop to 1.0926, as suggested by technical charts if Draghi negatively characterizes the Eurozone inflation and economic conditions and reiterates the need for bond purchases.
The final reading for the US second-quarter Gross Domestic Product (GDP) is also scheduled for release at 12:30 GMT. That backward-looking data, however, will likely be ignored by markets unless there is a significant upward or downward revision to estimates released last month.
As of writing, EUR/USD is changing hands at 1.0962, having clocked a low of 1.0942 in the Asian trading hours.