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EURUSD - Drops to One Month Low Below 1.1050 as ECB Holds Rates

   

 

EURUSD - Drops to One Month Low Below 1.1050 as ECB Holds Rates
 
In the last 24 hours the EURUSD has fallen sharply down below the key 1.11 level down to a one month low below 1.1050. For the last few days it had been struggling with resistance at the 1.11 level applying selling pressure and finally this level has won pushing the EURUSD lower. It was only a couple of weeks ago that the EURUSD had been rallying well off the support at 1.11 level right back into the middle of its popular trading range between 1.11 and 1.12, where it has spent the best part of the last month. It will now be eyeing off the key level at 1.10 as to whether it can provide support should the EURUSD continue to decline.

The EURUSD had moved strongly to close out last year and into the new year moving to a five month high near 1.1250, before easing back into the range. The 1.11 and 1.12 levels remain key and the EURUSD has been bouncing off both these levels for several months. Throughout all of November, the EURUSD traded back and forth between 1.10 and 1.11 meeting support and resistance at these levels. Earlier in the month, it made another strong rally off the 1.10 level back to 1.11, after falling sharply from near several month highs close to 1.12.

The 1.10 level provided strong support in November propping the currency pair up after the fall to start the month, and may be called upon again shortly. Most of the levels including 1.10, 1.11 and 1.12 have played a significant role in the last six months or alternating between providing support and resistance. At the start of October, the EURUSD dropped to a two year low below 1.09 and started to look precariously placed with no more obvious support levels below it, so it has done well to reverse and move as strongly as it has since then and remain above 1.10.

In its first rates meeting for 2020, the European Central Bank (ECB) voted unanimously to keep the main deposit rate at a historic low of -0.5%, in line with market expectations.  In a press conference following the decision on Thursday, ECB President Christine Lagarde said rates will “remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to, but below 2% within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.”  She added that the central bank “stands ready to adjust all of its instruments as appropriate” in order to guide inflation towards target.  Ms Lagarde said the risks surrounding the euro area growth outlook “related to geopolitical factors, rising protectionism and vulnerabilities in emerging markets remain tilted to the downside, but have become less pronounced as some of the uncertainty surrounding international trade is decreasing.”  “The implementation of structural policies in euro area countries needs to be substantially stepped up to boost euro area productivity and growth potential, reduce structural unemployment and increase resilience,” Lagarde added.

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The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.

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