EUR/USD hits fresh multi-year lows

Central bank interest rate decisions and statements dominate the day’s agenda as renewed dollar strength plays out across currency markets.

Dollar and euro notes
Source: Bloomberg

GBP/USD pushed lower by US data

At midday the Bank of England will announce interest rate decisions and asset purchasing facilities and both of these are expected to remain unchanged. This year alone has already seen 20 central banks decide to stimulate the markets by cutting interest rates and the race for who Australia or Canada will cut a second time this year could be a close-run thing. As a backdrop to whatever the BoE would like to do, it is increasingly unlikely that it (and the US) will be able to contrast the majority of global central banks without undue risk.

This week’s economic data has been broadly good for the UK however manufacturing and services figures posted in the US yesterday were even better, once again giving GBP/USD an extra nudge lower.

Having failed to hold above the 100-day moving average for more than 24 hours the fall to the 50-DMA looked almost inevitable. A break through this $1.5250 level and back down to the $1.50 region looks likely to materialise.

EUR/USD breaks below short-term support

EUR/USD had been gamely trying to hang onto the $1.1200 level as support but the flood waters have finally broken and the last 24-hours have seen 150 pips being knocked out of it. The European central bank will be updating the markets at a press conference at 1.30pm (London time). It is not anticipated that we will see any change to the already record-low interest rate although a sentiment statement on how the targeted longer-term refinancing operation, the asset-backed security purchasing scheme and the quantitative easing policies are running may well materialise.

The European Central Bank president Mario Draghi has, for a long time, promised that it would do ‘whatever it takes’ to get the eurozone’s recovery back on track and so far has been true to his word if a little slow to implement.

Now that EUR/USD has hit a fresh multi-year lows and broken below short-term support, a return to the more openly bearish mindset for the currency cross looks on the cards. This move may have already dropped EUR/USD into oversold territory but recent history would suggest this is a squeeze that could still have much more to come.

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