Draghi was dovish, the ECB’s monthly bulletin showed worries and the retail PMI remains in negative territory. Nevertheless, the common currency keeps taking advantage of the weak greenback and EUR/USD reaches new highs.
Three things should have stopped the euro:
- Dovish Draghi: The president of the ECB showed his utmost determination to act in order to combat low inflation. He did ask governments to do their share but took the time to explain that inaction is much worse than any unintended consequences of acting. He certainly raises expectations for March.
- ECB warnings: The ECB Economic Bulletin reiterated what Draghi said in his last presser: the danger to the inflation forecast has significantly grown. This also implies action, and this time ti comes from the staff, not from the president.
- Retail PMI: The retail sector in the old continent is still dragging along: a score of 48.9 points reflects contraction, and is even worse than the previous month.
Nevertheless, the dollar dive, inspired by Dudley’s dovishness and most importantly from the poor services report, continued hurting the US dollar across the board.
And EUR/USD takes advantage.
A high of 1.1167 was seen, yet another high since October. The next resistance line is at 1.1215, followed by 1.1290 and 1.1375. Support is what used to be resistance at 1.1145, followed by 1.1070.
A big event is coming tomorrow: Trading the US Non-Farm Payrolls with EUR/USD.
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