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EURUSD - Remains Well Supported by 1.0750 as German Court Surprises ECB



EURUSD - Remains Well Supported by 1.0750 as German Court Surprises ECB
In the last week or the EURUSD has eased away from resistance at 1.10 again and enjoyed more support from the 1.0750 area. Two weeks ago the EURUSD rallied well back up towards 1.09 after having spent two weeks easing away from resistance at the key 1.10 level. The last few weeks has seen the EURUSD slow down a little, as it has been on a rollercoaster ride, surging back higher from a three year low near 1.06 up above the key 1.11 level in the second half of May, before easing back below 1.10 again.

The EURUSD has enjoyed some support from the 1.0750 level on several occasions now as it is currently trading in a range between that level and resistance at 1.10, as it will be interesting to see which way it breaks.

In the middle of March the EURUSD fell sharply from its highest level in more than 12 months above 1.15 down to near 1.06 before rallying strongly in the week after, before easing below 1.10 in early April. Before the fall from 1.15, it had moved very strongly from a then three year low around 1.08. After having traded in a wide range generally between 1.10 and 1.12 for an extended period, this latest break lower, rally higher and then sudden drop is significant with volatility increasing as well. The 1.10 level has propped up the currency pair several times in the last few months however it failed on this occasion such was the strength of that drop, and with movement in the last few weeks, it has now likely reversed roles and will continue to offer some resistance to any movement higher.

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. 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. The 1.10 level provided strong support in November propping the currency pair up after the strong fall in March and along with 1.11 is now keeping prices lower.

European Central Bank (ECB) officials and financial markets have been surprised by a decision by the highest court in Germany, which declared some ECB actions have been illegal under German law.  Accordingly, the ongoing stability of the euro zone is under close examination yet again, as more questions are raised.  The court said the central bank’s quantitative easing program did not respect “the principle of proportionality”.  The ECB was fast to counter with the fact that it follows decisions taken by the European Court of Justice.  Meanwhile, Federal Reserve Chairman Jerome Powell said that U.S. policymakers may have to use additional measures to save the economy from its current predicament which has caused “a level of pain that is hard to capture in words.”  “While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” Fed Chairman Jerome Powell said in prepared remarks.

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