EUR/USD eases overnight
After opening higher on Sunday from Friday’s close EUR/USD has given up most of the gains it made, and the single currency has struggled to maintain rallies for a considerable amount of time.
The ECB rate decision and press conference on Thursday will be the main event of the week. The rate at which Mario Draghi has alluded to QE has been increasing, but so has Germany’s opposition to such a scheme. Sabine Lautenschlaeger, who represents Germany on the ECB’s board, echoed Jens Weidmann by vocalising her resistance to the idea of adding government bonds to the purchasing list.
I foresee Germany being against full blown QE while the economy is growing, even if the growth rate is minuscule. The government bond market is pricing in QE, but I feel Mr Draghi will continue to talk the currency lower without acting on his hints.
EUR/USD has declined for the past five months in a row, and with the divergence in the two economies I see no sign of the downward trend letting up.
Federal Reserve members William Dudley and Stanley Fischer are expected to deliver a speech in New York at 5.15pm and 6pm (London time). Both members sit in the dovish camp, and if neither changes their tune we could see a further pullback in the US dollar.
The euro is encountering resistance at the 50-hour MA of $1.2457. As Alastair McCaig stated, $1.24 has acted as support recently so that level is the near-term target. As I previously mentioned, only a move through the 50-day moving average of $1.2571 would help bring an end to the downward trend.