EUR/USD Bounces From Key Support as Dovish Draghi Defers Taper Talk

Talking Points:

– This morning’s ECB rate preference saw a bank take a dovish tinge while creation no adjustements to financial policy, both as was widely-expected. This helped to bleed a discerning drop in a singular currency, though that sell-off was singular as a rebound began to uncover shortly after a start of a press conference.

– This raises a doubt of either Euro debility will extend. While many were awaiting a dovish lean during this morning’s rate decision, a fact that debility could not uncover some-more movement competence be a vigilance that EUR/USD is being driven by USD-trends; while a span like EUR/JPY competence be a bit some-more appealing for a blur of this morning’s quick-dip of weakness.

– DailyFX Forecasts have been updated for Q2, and are accessible from a DailyFX Trading Guides page. If you’re looking to urge your trade approach, check out Traits of Successful Traders. And if you’re looking for an rudimentary authority to a Forex market, check out a New to FX Guide.

Do we wish to see how sell traders are now trade a US Dollar? Check out a IG Client Sentiment Indicator.

ECB Goes Dovish – EUR/USD Puts in a Bounce

This morning’s ECB rate preference saw no pierce on rates as was widely expected. We did see ECB President Mario Draghi take a dovish tone, again, as was widely expected. And in response we saw an initial pierce of debility in a singular currency; though that movement could not reason and we’re already saying bounces starting to show. The pivotal vigilance of dovishness during this morning’s rate preference wasn’t something that was said, though rather something that was left unsaid, and that’s what a bank competence demeanour to do when it comes time to pierce divided from emergency-like financial accommodation in a Euro-Zone.

As we were coming Q2, a far-reaching expectancy was that we’d hear some component of a devise or plan for what a ECB competence do after September. And given a strength that had formerly shown in a European economy, it done clarity to demeanour for a pierce towards ‘less loose’ financial policy. But from all signs in a ECB’s matter this morning, a bank looks set to stay lax and dovish for a foreseeable future, even over a stream QE program’s Sep finish date.

During a opening matter during a press conference, Draghi privately cited ‘moderation’ in information given a bank’s Mar assembly as a reason to sojourn cautious, while also indicating out that ‘underlying acceleration stays resigned and has nonetheless to uncover convincing signs of a postulated ceiling trend.’

All in all – this does not sound like a bank that’s tighten to a impulse exit.

The net response was an initial strike of Euro-weakness, nonetheless that debility was unevenly distributed; and we’re already saying some rebound off of a lows. The downside pierce in EUR/USD was rather minor, while pullbacks in EUR/JPY and EUR/GBP were a bit some-more visible. Considering that the US Dollar is saying strength after a really bullish week of price action, and a pullback in that thesis can make sense; and that pullback in USD-strength is assisting to equivalent some of this morning’s Euro-weakness.

EUR/USD Holds Key Support

Yesterday we looked during the turn of 1.2167 in EUR/USD, and this is a 50% retracement of a 2014-2017 vital pierce in a pair. This vital pierce was a pricing-in of ECB QE, and over a past year as we’ve seen marketplace participants perplexing to position for a impulse exit, some-more than half of that before bearish trend has been erased.

We’ve twice seen this turn yield support progressing in a year: In mid-January and again in early-March. This was a three-month low in a span until we tested by progressing this morning forward of ECB.

EUR/USD Weekly Chart: 50% Retracement of 2014-2017 Move Helps to Hold a Lows

eurusd weekly chart

Chart prepared by James Stanley

EUR/USD: Is This Week’s Bearish Run Complete?

The large doubt around EUR/USD during this indicate is whether we’ll see a lapse of bullish cost action. EUR/USD sank down to 3 month lows as US Dollar strength was piping-up over a past week, and this was really most formed on a thought that a ECB could get some shake room to grow a bit some-more dovish given a new slack in European data. But now that we have that in a books – are we going to see a delay of EUR/USD debility and USD strength?

On a four-hour draft below, we’re focusing-in on a pivotal segment around a before indicate of insurgency we looked during progressing in a week. This territory runs from around 1.2237 adult to 1.2250, and this was a feeder indicate of insurgency when sellers came behind in on Tuesday. If we do see lower-high insurgency from here, a re-test of 1.2167 becomes a probable play; though if we don’t see any insurgency show, afterwards we competence have a deeper bullish pierce to work with in EUR/USD as those prevalent trends come behind to order.

EUR/USD Four-Hour Chart: Bearish Continuation Prospects Should Lower-High Resistance Hold

eurusd 4 hour chart

Chart prepared by James Stanley

EUR/JPY Tests Below Prior Resistance as Bullish Trend Remains

As remarkable earlier, that initial drop in a Euro was a bit some-more manifest divided from a US Dollar. In EUR/JPY, we tested next a pivotal indicate of insurgency that had formerly functioned as a two-month high in a pair; though bulls did lapse forward of a trend-line re-test. This keeps a doorway open for bullish potential, and for those looking to trade Euro-strength after this morning’s rate decision, this competence be a bit some-more appealing during a impulse given a new lapse of Yen-weakness.

EUR/JPY Four-Hour Chart: Strength Continues After ECB-Fueled Dip

eurjpy 4 hour chart

Chart prepared by James Stanley

To review more:

Are we looking for longer-term research on a U.S. Dollar? Our DailyFX Forecasts for Q1 have a territory for any vital currency, and we also offer a engorgement of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay adult with near-term positioning around a IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a engorgement of tools, indicators and resources to assistance traders. For those looking for trade ideas, a IG Client Sentiment shows a positioning of sell traders with tangible live trades and positions. Our trading guides move a DailyFX Quarterly Forecasts and a Top Trading Opportunities; and a real-time news feed has intra-day interactions from a DailyFX team. And if you’re looking for real-time analysis, a DailyFX Webinars offer countless sessions any week in that we can see how and because we’re looking during what we’re looking at.

If you’re looking for educational information, a New to FX guide is there to assistance new(er) traders while a Traits of Successful Traders research is built to assistance whet a ability set by focusing on risk and trade management.

— Written by James Stanley, Strategist for DailyFX.com

To accept James Stanley’s research directly around email, greatfully SIGN UP HERE

Contact and follow James on Twitter: @JStanleyFX

About author