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Euro downside pressure mounts

ECB President Mario Draghi spoke twice last week and continues to be extremely dovish heading into next week’s policy meeting. 

Euro
Source: Bloomberg

Mr Draghi spoke in Frankfurt and said the ECB will do what it must to raise inflation and inflation expectations as fast as possible. He feels some measures of inflation have dropped to levels deemed excessively low and should current objectives fail to ignite a recovery the ECB will step up the pressure and broaden the channels through which it intervenes.

The ECB will be looking to alter the size, pace and composition of its purchases as required. This has put European equities in a good spot at the moment, while the euro is a sure sell. This simply means bad data is good news for Europe in the near term.

EUR/USD dropped through $1.2400 again and is currently retesting November lows in the 1.2358 region. I would be looking for a momentum play here and selling on the break of that support. A break will see it trade at the lowest since August 2012 and traders will be eyeing a move to August lows at 1.224.

EUR/USD chart

EUR/USD chart

EUR/USD chart
Source: Bloomberg

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