EUR/USD drops sharply on worries for Draghi drag

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EUR/USD woke up from its pre-ECB nap and dropped some 70 pips, holding onto 1.12 at the moment.

The trigger is related to the ECB meeting tomorrow. Leaks, rumors, and reports are quite common and this is no different.

The ECB is reportedly going to cut inflation forecasts for 2017, 2018, and 2019 to only 1.5%, a damp outlook. Given such a forecast, there is little need to remove the policy accommodation. The ECB was expected to upgrade its assessment in tomorrow’s meeting, setting the stage for an announcement about the end of QE in September.

With lower forecasts, they could move in a slower manner to remove their support for the economy, keeping the pressure on the euro.

Here is the full preview for the ECB: balanced risks could provide a buying opportunity – 3 scenarios

On the other hand, they are set to upgrade growth forecasts. We already know that growth is improving, 0.5% in Q1, while inflation is taking two steps forward, one step backward. Draghi’s recent statements are optimistic about growth but cautious on inflation.

Here is how it looks on the EUR/USD 30-minute chart. Support awaits at 1.1160, followed by 1.1120 and 1.1020. Resistance is at 1.1280 and 1.13.

Earlier in the day, German factory orders came out with a drop of 2.1%, worse than -0.2% expected. This did not have an influence like this ECB report.

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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 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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