EUR/USD dropped but reversed quite quickly on Draghi’s declaration that no further cuts are needed anytime soon. The team at Goldman Sachs sees this is unjustified and discusses the next moves: Here is their view, courtesy of eFXnews: As we have done before, we use intraday data from last week’s press conference to identify what drove the market. The initial announcement (at 7:45 ET) saw EUR/$ fall over one big figure, likely reflecting the step up in the monthly run-rate of purchases. But as soon as the Q&A began, EUR/$ started rising, first on President Draghi’s comment that “there is no need to cut rates further,” which fed the market narrative that the ECB is running “out of bullets,” and then on the growing realization that corporate bonds are part of stepped-up QE purchases, underscoring that the market sees credit easing as Euro positive (Exhibit 1). Last week’s price action is reminiscent of June 2014, when the ECB first cut the deposit rate to negative and announced credit easing. During that press conference, President Draghi said -0.1% on the deposit rate represented the lower bound, which was of course reversed in September. He also acknowledged that credit easing may cause the Euro to strengthen, thanks to inflows from abroad (Exhibit 2). That press conference saw EUR/$ rally throughout and for the rest of the month. We think a good part of last week price action is unjustified. After all, the ECB did surprise on the dovish side and – much as in the wake of June 2014 – the ECB may well end up cutting interest rates more. But is it also true that last week’s actions – by tilting in the direction of credit easing – may be de-emphasizing the role that the exchange rate plays in easing financial conditions. We don’t think this makes much sense; you only have to look at today’s move in financial conditions, which tightened despite a favorable move in credit spreads. In the end, we think ECB policy will have to confront the constraints around sovereign bond buying, in order to ease financial conditions sufficiently to meet the inflation target. Tactically, while we hold to our 12-month EUR/$ forecast of 0.95, we don’t think risk-reward for Euro downside is compelling in the near term. For lots more FX trades from major banks, sign up to eFXplus By signing up to eFXplus via the link above, you are directly supporting Forex Crunch. Yohay Elam Yohay Elam 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 a 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. Yohay's Google Profile View All Post By Yohay Elam Forex News Today: Daily Trading News share Read Next 5 Tips for Brokers to Show Off What they Have Yael Warman 7 years EUR/USD dropped but reversed quite quickly on Draghi's declaration that no further cuts are needed anytime soon. The team at Goldman Sachs sees this is unjustified and discusses the next moves: Here is their view, courtesy of eFXnews: As we have done before, we use intraday data from last week's press conference to identify what drove the market. The initial announcement (at 7:45 ET) saw EUR/$ fall over one big figure, likely reflecting the step up in the monthly run-rate of purchases. But as soon as the Q&A began, EUR/$ started rising, first on President Draghi's comment that "there is… Regulated Forex Brokers All Brokers Sponsored Brokers Broker Benefits Min Deposit Score Visit Broker 1 $100T&Cs Apply 0% Commission and No stamp DutyRegulated by US,UK & International StockCopy Successfull Traders 9.8 Visit Site FreeBets Reviews$100Your capital is at risk.2 T&Cs Apply 9.8 Visit Site FreeBets Reviews$100Your capital is at risk.3 Recommended Broker $100T&Cs Apply No deposit or withdrawal feesTrade major forex pairs such as EUR/USD with leverage up to 30:1 and tight spreads of 0.9 pips Low $100 minimum deposit to open a trading account 9 Visit Site FreeBets ReviewsYour capital is at risk.4 T&Cs Apply Visit Site FreeBets ReviewsYour capital is at risk.5 Recommended Broker $0T&Cs Apply Trade gold, silver, and platinum directly against major currenciesUp to 1:500 leverage for forex trading24/5 customer service by phone and email 9 Visit Site FreeBets ReviewsYour capital is at risk.