Credit: The EUR has shown some resilience this week as the forex market has been on hold awaiting the ECB meeting on Thursday. No change in policy is expected, leaving attention on ECB president Draghi’s press conference. The question is not if but how dovish he will be in his press conference.
His comments will be closely scrutinized as some see a greater risk of a December policy ease as that is when fresh economic forecasts will be available. A key focus of central bank policy, especially the ECB with its price stability mandate, remains on low inflation, which continues to print well below the “about” 2% target level despite attempts to push it higher.
Perhaps equally important is the resilience of the EURUSD, which is currently trading (1.1352) just above the 1.1284 midpoint of its 2015 range (1.2108-1.0459). The high for the year was set on January 2 and the low on March 16. This suggests no compelling reason to show any concern over the EUR fx rate.
What is the ECB FX Line in the Sand?
Some say the ECB does not want to see the EURUSD trade above 1.15. Others say 1.20 is the ECB line in the sand. In any case, should Draghi sound more dovish than expected, some may take it as a EURUSD rate protest and an attempt to push the currency lower. A weaker currency remains a policy tool (even if central banks say otherwise) that can be used to push up inflation.
Ahead of the meeting, EURUSD has traded within 1.13-1.14 each day this week, a range too tight to last for long. The recent high is at 1.1495. Key supports are at 1.1135/05. Daily forex moving averages remain positive but 1.14-1.15 is seen as a tough zone.
1.1281 = 20 day
1.1255 = 50 day
1.1173 = 100 day
1.1129 = 200 day
Jay Meisler, founder
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
