The Euro fell around 100 pips yesterday after the ECB had cut rates by 10 bps, as the market was already expecting. Mario Draghi also sent a message to the market that there is no targeted end date to QE as they would introduce OPEN-ENDED QE at a rate of EUR 20bln/month. However, a half an hour later, US President Trump tweeted that the ECB are hurting US exports with a much cheaper Euro against a VERY strong dollar. Putting additional pressure on the FED to cut rates in their next week FOMC meeting. Right after his tweet, the Single currency quickly reversed course and surpassed levels from before the ECB announcement as the market started to price in a 100% chance of a FED rate cut next week. Will Powell and co. feel the pressure from the President to cut more than they really want to? That remains to be seen. Looking forward, today’s US Retail Sales along with the Michigan Consumer Sentiment report will have a strong say in next week’s potential rate cut. A weak data will most likely send the Dollar much lower.
The Single currency touched the critical support for the second time this month at 1.0928, bounced strongly to the other extreme end, and retested the bearish trend line. Despite this strong bounce, the bias remains with the bears as long as the common currency remains below the 200 day-moving average and the 1.1110 resistance. A successful break above those levels, the trend would finally shift to the bulls’ side.
Support: 1.1065 / 1.1015
Resistance: 1.1110 / 1.1165