ECB President Draghi's speech today triggered a sharp fall in EUR/USD to a two week low. The pair has broken below some significant support although candles closes on the higher time frames are needed for confirmation.
Much of the ECB President’s speech was about subdued inflation and the causes of it. The part that the market particularly reacted to a reaffirmation that policymakers were open to easing further.
Here are some quotes that stood out from his speech:
I think this is a classic example of a speech where the content is vague enough that one could either argue that it is dovish, or not all that different from prior rhetoric.
It’s not exactly new to hear Draghi, or any policymaker these days for that matter, to say they will introduce new stimulus if it is warranted. Especially in the case of the ECB who just introduced easing measures at their meeting earlier this month.
I do find it interesting that he emphasized so much on low inflation and that he decided to discuss this one day before the Fed meeting.
The markets have responded strongly to Draghi’s speech with EUR/USD dropping about 50 pips roughly an hour after his speech.
EUR/USD has fallen through some major levels. First, the pair has fallen below its 100 and 200-period moving averages on a 4-hour chart. Second, EUR/USD failed to hold above a significant horizontal level at 1.1204. It is considered important because it confluence with the 61.8% measured from the June low. Also, the 4-hour 200 MA falls close to it.
The breach of the major price point reaffirms that sellers remain in control.
The next level of support that I see falls at 1.1176. This level marks the March low and has previously acted as support.
Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.