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Jean-Claude Trichet’s almost last press conference was on a softer tone regarding the economy, but on a harsher tone towards governments.

EUR/USD ends the press one range lower, with significant downside risks, as Trichet said. Wrap up of this event and a look forward.

  • There are downside risks to growth – down from balanced risks.
  • There are  no upside risks to inflation., from upside risks beforehand.
  • These are major changes, and Trichet stressed it more than once.
  • The ECB is monitoring the situation. He refuses to discuss an option of rate cuts.
  • Trichet blames governments for “benign neglect” of commitments and urges them to act on deficits.
  • The ECB “sent messages to Italy. He doesn’t see it as a dictate.
  • He got furious when asked about complaints from Germans. Quite an unusual behavior.  The ECB is “fiercely independent” and has done a better job with inflation than the Bundesbank, despite having the worst crisis since WWII.
  • Ireland must not impose haircuts on senior bondholders, as it must be “credit worthy”.
  • The plan for Greece is “in the interest of the Greek people”. No comment on the next phase for Greece.

For more of what Trichet said, see the full coverage of the press conference.

EUR/USD dropped instantly from 1.4040 to under 1.40, and tested the support at 1.3950. It briefly went down to 1.3943 before returning to range.

After previous ECB press conferences, the moves were occasionally extended afterwards, during the US and Asian sessions. Will the euro extend its falls?

The Swiss National Bank is guarding EUR/CHF 1.20. If this is a measure, EUR/USD has room for falls as EUR/CHF is currently at around 1.2130. But there are many more forces.

Lower support is at 1.3838. Further resistance is at 1.41 and 1.4160.

For more on the euro, see the EUR/USD forecast.