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EURUSD - Steadies above 1.11 as ECB Expected to Act



EURUSD - Steadies above 1.11 as ECB Expected to Act
In the last two weeks the EURUSD has rallied strongly back into one of its favourite trading ranges between 1.11 and 1.12 after falling sharply from the key 1.11 level back down to another key level of 1.10, before dropping further. The EURUSD fell to a three year low before its recent rally. After having traded in a wide range generally between 1.10 and 1.12 for an extended period, this latest break lower and rally is significant with volatility increasing as well.

The 1.10 level has propped up the currency pair several times in the last few months so it may now offer support again should the EURUSD ease from its current range.

It was only several weeks ago that the EURUSD rallied 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 December / January. 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. 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.

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 fall to start the month and will be likely called upon again. The more significant level presently is 1.12 as it hasn’t trade above there for nearly 12 months.

In a surprise move, the U.S. Federal Reserve (Fed) has cut its benchmark interest rate by 50 basis points.  “The coronavirus poses evolving risks to economic activity,” the Fed said in a statement. “In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate.”  In light of this, the European Central Bank (ECB) is also expected to announce stimulus measures soon, with the ECB due to meet next week, however some believe they may announce something before then.  According to the European statistics office, euro zone inflation fell to a three-month low in February, which adds weight to the situation.  ECB President Christine Lagarde said, “the coronavirus outbreak is a fast developing situation, which creates risks for the economic outlook and the functioning of financial markets” in a statement.  She added that the ECB is “monitoring” the situation and that it stands ready “to take appropriate and targeted measures.”  Some analysts believe this is a signal that the central bank is ready to take action to address the slowdown, the virus outbreak and the highly likely economic slowdown.

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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.