EUR/USD: The Euro plunges then rebounds strongly in the face of the ECB, explanations


© Reuters. The Euro falls and then rises in the face of the ECB

Investing.com – The press conference of Mario Draghi led to a strong increase of the volatility on the EUR/USD pair.

In the Face of the about cautious the boss of the ECB, the Euro has indeed fallen to 1.1305 Dollar, before bouncing back, moving on to 1.1370 at the time of the writing of this article.

The most influential of the press conference was the fact that Draghi said that ” the risks to the growth outlook of the euro zone moved downward on a background of persistent uncertainties related to the geopolitics and the threat of protectionism, the vulnerability of the emerging markets, and volatility in financial markets.”

This is the first time that the ECB degrades its language on the perception of the risks that weigh on the growth that the Central Bank will publish its updated economic forecasts, which explains the initial reaction to the downside of the Euro.

In relation to the strong rebound that followed, it is first of all to be attributed to technical factors, with the approach of the psychological support key 1.13.

The apparent reluctance of Draghi to consider the implementation of the TLTRO (loans at low interest rate to banks) in response to a question from a journalist also participated in the rally of the Euro.

We could also see a weakness of the us Dollar at a time when the Euro is well established, in connection with a statement of Wilbur Ross, according to which the United States and China are far from a trade agreement.

Finally, it should not be forgotten that, after the european PMI indexes disappointing this morning, the market anticipated very largely an outcome dovish tone to the meeting of the ECB, which also explains the rebound after a brief initial fall.

From a technical point of view, it should be noted, however, that only a return back above 1.14 would consider buying opportunities. Likewise, only a break below 1.13 would realign the bias of short-term, with the downward trend of background. Therefore, the situation remains for the moment unclear.

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