The ECB president sent a strong signal to investors expecting an immediate rate cut yesterday. Forward guidance indicated that rates are expected to remain at current or lower levels at least through Q1 of 2020. This is despite the fact that Draghi mentioned the need to stimulate the economy in the near future.
Euro was supported following the less-dovish surprise.
All eyes now turn to the next FOMC policy meeting. This is what will determine the performance of EURUSD.
Euro Falls Before ECB, Soars After
Expectations of a Thursday rate cut on the back of an array of poor economic data in Germany, France and also in the wider euro area sent the euro lower. The soft patch of releases had investors thinking EURUSD will break the 1.11 psychological level and reach fresh lows. However, the ECB opted to keep rates on hold, supporting the beleaguered currency.
Will the 1.11 Support Hold Firm?
A false break below the strong 1.1116 bottom formed as Draghi dialed back on his dovish tone. This reversed the course for EURUSD. The rejection near the June low of 1.1181 came following a bounce from the 50% Stochastic indicator and as bulls started taking profits. As a result, the pair ended the session with a daily Doji bar, and that increases the chances of a bullish reversal.
Dollar Upbeat on Positive Data
Although the dollar was taking a beating against a strong euro during and a little after Draghi’s speech, the sugar rush did little to hold USDJPY low. Core durable goods and jobless claims came out better than expected at 1.2% and 206K. The two economic releases were expected at 0.1% and 218K respectively, pummelling expectations. Safe-haven outflows supported the currency pair to break to a fresh July high.
Will Dollar Give Up Its Gains?
The USDJPY high of 108.75 was reached after bulls pushed prices above the 108.60 July-high resistance. Trading within an ascending channel, chances of further upside towards 109 remain elevated. However, the 108.28 support must remain firm should prices start a decline in the short-term.
WTI Muted On Contradicting Factors
Despite heightened geopolitical tensions in the Middle East, oil prices remained unchanged yesterday. Following a poor EIA inventories report on Thursday and news that Saudi is going to boost crude pipeline capacity, earlier gains from central bank language were offset. Monetary stimulus, however, could help the oil in the medium term. This is provided industrial demand remains of course at par levels.
US Oil Rangebound But Close to Breaking
Demand for oil saw a slide at the 57.66 high on early Thursday, where prices reversed course and headed towards to the bottom of the tight 57.66-56.05 range. Given the current state of economies and rejection by the 50% Stochastic level, should the descending channel keep prices under pressure oil could soon reach the 54.83 level.