EUR/USD is back to hugging the 1.25 level, not moving too far from there as tensions are even higher towards the ECB meeting. A reported “challenge” to Draghi about his style, or perhaps about the direction of policy is now out in the open. Will Draghi be less dovish or even quite? Or will he push forward with a message on more easing? Apart from that, markets are also awaiting the NFP tomorrow, which also carries higher expectations now.
Here’s a quick update on technicals, fundamentals and sentiment moving the pair.
- Asian session: The pair climbed back above 1.25.
- Current range: 1.25 to 1.2570.
Further levels in both directions:
- Below: 1.25, 1.2440, 1.2360, 1.2250.
- Above: 1.2570, 1.2620, 1.2660, 1.2750.
- 1.2440 is an old line and also the recent low, making it key support.
- 1.2660 is strong resistance now.
EUR/USD Fundamentals
- 6:00 German Factory Orders. Exp. 2.2%, actual 0.8%, but with an upwards revision.
- 12:45 ECB rate decision. No change expected from 0.05% lending rate, -0.20% deposit rate.
- 13:30 ECB Press Conference. Join us for a live video coverage.
- 13:30 US jobless claims. Exp. 285K.
- 13:30 US Nonfarm Productivity. Exp. +0.9%.
- 13:30 US Unit Labor Costs. Exp. 1%.
- 18:30 US FOMC member Jerome Powell talks.
* All times are GMT.
For more events and lines, see the Euro to dollar forecast.
EUR/USD Sentiment
- ECB drama: There is a growing row between Draghi and some doves on one side, and the Germans on the other side. His management style has been questioned: The president has been blamed about not consulting and doing things that were not agreed upon. However, it seems as this is actually opposition to QE. Is Draghi cornered? Are his hands tied and the only thing to do is to quit? Probably not. It seems that the Bundesbankers are venting their anger in public, to show they are putting up a fight, but they know they have no choice. The personal relations will likely be in the center of the press conference. More: Expect Draghi To Prevail; Staying Short EUR/USD targeting 1.18 – BNPP
- ECB options: The European Central Bank convenes on Thursday on the backdrop of ongoing weak inflation, despite a weaker euro, and it’s not only oil prices. Will Draghi hint about more aggressive steps? There is speculation about outright QE or buying corporate bonds, but both seem unlikely. A vague hint about a “massive” or “sizable” expansion could do the job.
- Midterm elections: Republicans won the Senate and held the House in a landslide victory. This gave the dollar some kind of a temporary boost, but it seems that Washington is still split, and that the markets will move more on central banks than on politicians.
- High hopes for NFP: Indicators leading up to the Non-Farm Payrolls report have been quite positive, to say the least: ADP NFP beat expectations with +230K and an upwards revision. And while the ISM Non-Manufacturing PMI missed on the headline, the employment component is at the highest since 2005. This lifts hopes.
- Hawkish Fed: The Fed ended QE and also sounded quite bullish about employment, acknowledging “solid job gains”. In addition, Yellen and her colleagues were not too worried about inflation and there was one dovish dissenter for a change. All this supported the greenback.
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