Euro hanging on to key support

Mario Draghi will testify before the Committee on Economic and Monetary Affairs and might provide some commentary on stimulus measures.

ECB
Source: Bloomberg

Given the lack of volatility in the single currency in recent times, it will be interesting to see if this trend continues. Industrial production for the region is also due out and the market is actually expecting it to retreat to 0.3% (down from 0.8%). Further signs of a weakening European economy will only fuel further stimulus talk.

While EUR/USD continues to hold on to the 1.3600 handle, it seems there is potential for some near term downside. Any moves higher have been used as an opportunity to sell and that is likely to remain a trend in the near term.

Alternatively, some aggressive traders might be looking at a momentum play on a break below 1.3600. On the US dollar side of the equation, there isn’t much to look out for today but the activity picks up tomorrow when we get retail sales, the Empire State manufacturing index, import prices and business inventories.

Janet Yellen will testify before the Senate Banking Committee and there is a risk she could turn less dovish. In that case, we could easily see the US dollar edge higher and in turn weigh on the pair further. Recent Fedspeak has alluded towards a more neutral stance as key indicators track ahead of expectations.

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