In the last few weeks it has moved strongly lower from above 1.12, where it had numerous doji and pin bar candlesticks showed how enthusiastic the selling was during that period, down through any support at 1.11 – all of which are bearish signs. For the last four months the EURUSD has enjoyed a lot of support from the 1.11 level so it is significant that it has now failed at this level, which has now turned to offer some resistance.
Throughout July however the EURUSD fell sharply from above 1.14 down through the support at 1.11 and fall to its lowest levels in more than two years. After enjoying some support from 1.12, as expected this level stepped in as some resistance thwarting attempts to regain lost ground. In the second half of June, the EURUSD enjoyed a solid surge higher from support at 1.12 back to the 1.13 level before breaking higher and reaching a three month low just above 1.14, although it reversed quickly and fell strongly back to the key 1.13 level before drifting lower and testing the support at 1.12.
For the most part of this year the EURUSD has traded in a range between 1.11 and 1.13 with very few excursions outside and after its recent decline, it is attempting again to remain within the range. As mentioned, over the last few months the EURUSD has been well supported by the 1.11 level and on several occasions, it appeared as if the currency pair was poised to move through this level to a two year low, which it now has in the last few weeks.
As widely expected, the European Central Bank (ECB) cut its main deposit rate by 10 basis points to a record low -0.5%, as well as announcing a new large bond-buying program, in another attempt to revive the ailing economy. The central bank’s quantitative easing (QE) program amounts to 20 billion euros per month of net asset purchases for as long as it deems necessary. The ECB has announced that it now expects interest rates to remain at their present levels or lower until it has seen its inflation outlook “robustly converge to a level sufficiently close to but below 2% within its projection horizon, and such convergence has been persistent.” ECB President Mario Draghi addressed the media following the rates and QE announcement and asked individual governments to play their part in helping to restore the eurozone economy. “In view of the weakening economic outlook and the continued prominence of downside risk, governments with fiscal space should act in an effective and timely manner,” Draghi said. “In countries where public debt is high, governments need to pursue prudent policies that will create the conditions for automatic stabilizers to operate freely. All countries should reinforce their efforts to achieve a more growth-friendly composition of public finances,” he added.
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