EUR/USD clinches daily highs beyond 1.1170
- EUR/USD moves lower and tests new YTD lows, rebounds afterwards.
- ECB left unchanged its interest rates.
- ECB now sees rates at ‘present or lower’ levels until H12020.
The shared currency has managed to quickly reverse the dip to yearly lows vs. the greenback and is now pushing EUR/USD to daily highs above 1.1170.
EUR/USD rebounds despite dovish ECB
The selling bias around EUR has now evaporated in spite of the dovish message from the ECB. In fact, the central bank altered its forward guidance and now sees interest rates at ‘present or lower’ levels until at least mid-2020.
In addition, the central said it is studying the re-implementation of the QE programme and is also assessing the potential use of a tiered deposit rate system.
At his press conference, President Draghi stressed the manufacturing sector is deteriorating further, reiterating that risks to the outlook remain tilted to the downside. Regarding inflation, the ECB sees that convergence if further out, expecting consumer prices to gather upside traction by year-end.
Draghi also noted that the Council did not discuss the size of rate cuts today, while the bank would see the next projections before taking action.
Despite the dovish tone from today’s ECB event and Bund yields dropping to record levels, the pair is managing well to stay well away from the 1.1100 handle for the time being at least.
EUR/USD levels to watch
At the moment, the pair is gaining 0.26% at 1.1168 and a breakout of 1.1238 (55-day SMA) would target 1.1286 (high Jul.11) en route to 1.1309 (200-day SMA). On the other hand, immediate contention emerges at 1.1101 (2019 low Jul.25) seconded by 1.1021 (high May 8 2017) and finally 1.0839 (monthly low May 11 2017).