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21st July 2017 - Draghi could prop EUR up, while USD is still depressed by the political risks

   

The single currency could continue in its upside channel versus the greenback, after Draghi has signaled that the ECB members are to talk about the QE tapering next autumn.

 

EURUSD-21-07-2017 06-33-56 ص

 

The market participants found a reason to push the single currency higher in this mentioned comment by the ECB president which looked an appreciation of the current markets pricing, after evolving of the economic activity and rising of the prices dragged EU away from the deflation risks.

The ECB president who managed to not shock the markets by more silence had said earlier this month that "the economic growth in EU is broadening but the prudence in adjusting the monetary policy is still needed".

He has mentioned also that there have been discussions in the ECB previous meeting on last Jun. 8 about removing the ECB forward guidance from its released economic analysis.  

His comments helped EURUSD to foot above1.12, before gathering higher momentum to be at the current levels which are nearly whereas it had been, before imposing the ECB QE.

 

But the ECB statement looked unchanged reflecting its appreciation of the inflation inability to gather momentum but it has seen that the inflation is to rise up but this is looking to be by a gradual way. So, the substantial degree of accommodative monetary policy is still needed in EU.

The ECB managed to keep also the QE forward guidance that "if the outlook becomes less favorable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, The ECB stands ready to increase its asset purchase program in terms of size and/or duration"

This keeping means that there is still no will or need to show change of the current monetary policy, before considerable rising of the inflation outlook.

As expected, The ECB kept the main refinancing rate at 0, the marginal lending rate at 0.25% and the deposit rate unchanged at -0.4% respectively.

The ECB maintained the QE buying program at 60B euro the monthly running, until the end of December 2017 keeping also the option of extending it beyond that time, if necessary to sustain inflation to reach its yearly target which is close but below 2%.

 

So, The waiting ahead would be for removing of this dovish forward guidance first, before QE tapering will not happen before the beginning of Autumn, if there is to be ascending of the inflation upside risks to move the ECB.

While June EU CPI came earlier this week to show rising yearly by 1.3% as its preliminary figure has shown previously which has been the slowest pace of rising since December 2016.

While The greenback is still under the pressure of the ascending political risks which is threatening the economic reflation and weighing on the interest rate outlook in US, following U.S. special counsel announcement that it's now looking for financial ties between Russia and Trump who has had a shocking week started with the death of his  health-care reform bill.

After forming series of higher lows since the beginning of this year when it formed a bottom at 1.0339 on the third day of this year to be the lowest level since December 2002.

EURUSD entered new pricing range trading close to 1.1630, after it could gather higher momentum by breaking out its previous resisting level at 1.1616 which has been formed on May. 3, 2016.

EURUSD could succeed to keep higher existence above its daily SMA50, its daily SMA100 and its daily SMA200

EURUSD is in its day number 19 of continued existence above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today 1.1436.

EURUSD daily RSI-14 is referring  now to existence just inside the overbought region above 70 reading 70.734.

EURUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is still having its main line in the overbought region above 80 at 81.860 leading to the upside its signal line which is at 81.132.

 

Important levels: Daily SMA50 @ 1.1283, Daily SMA100 @ 1.1017 and Daily SMA200 @ 1.0849

S&R:

S1: 1.1370

S2: 1.1312

S3: 1.1180

R1: 1.1713

R2: 1.1871

R3: 1.2226

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