Several weeks ago, 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.
Throughout August it 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, and this level is now starting to play a role again now that the EURUSD has rallied back above 1.11. Throughout July 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. As mentioned, for several months the EURUSD was well supported by the 1.11 level and so it is again now. Should any support fail at 1.11, it is highly likely some support will be found at 1.10.
The European Central Bank (ECB) recently 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. However, the latest decision seemed to divide the central bank. There are some doubts starting to be raised over negative interest rates among some ECB officials, with some starting to suggest they may cause more harm than good. In a recent interview, new Austrian National Bank Governor Robert Holzmann was very critical of the ECB’s ultra-easy monetary policy and was hopeful the soon to be new President Christine Lagarde takes a different approach. “My statement is that the current monetary policy... is wrong and that a different policy is needed in the future,” Holzmann said. “Christine Lagarde is a very good politician. She has also been able to balance different opinions at the International Monetary Fund,” he said. “I am convinced that she has heard the dissenting voices, that she will take them seriously and will try to find a new approach here.”
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