Draghi Speech: ECB doves inspire EUR bears

Global Market

Euro bears were instilled with inspiration following Mario Draghi’s dovish rhetoric on the Eurozone economy in the ECB press conference. As expected his repeated mantra about the ECB implementing additional stimulus measures if needed, as a tool to promote economic growth within Europe was approved by market participants. With expectations intensifying that the European Central Bank will take action in the near future, the EURUSD instantaneously dived, burning through the 1.1300 support and printing new daily lows. Moving forward, the EUR may be exposed to more downwards pressure as investors increase bets on more QE, a scenario most desirable for the ECB.

Following the deep decline which the EUR experienced across the board, questions may be raised on how much punishment the Eurozone has to experience before the ECB’s dovish rhetoric limits a EUR selloff in the future. For the most part of 2015 the Eurozone has been left vulnerable from the decline in commodity prices which has sabotaged its 2% mediumterm inflation target. A fragile Dollar derived from fading expectations of a US rate hike in 2015 has caused the EUR to appreciate against the USD which has bruised European exporters. September’s deflationary CPI reading of 0.1% mixed with the increasing fears of an economic slowdown in Europe have all trickled down, putting the ECB in a very tight position.

Even though ECB Governor Nowotny provided some clarity to market participants when he bluntly stated that the central bank was missing its inflation targets, it does feel like the ECB is in standby mode with the catalyst to move forward being nothing other than the Fed. The expectations of a US rate hike in 2015 have rapidly diminished, but if the 30% probability of a hike in December materializes then the ECB may be offered a lifeline. A US rate hike will empower the USD against the EUR, inducing an environment which will benefit European exporters and provide the first steps to not only reinvigorating economic growth within the Eurozone, but also a creating a rise in inflation.

USDTRY

The USDTRY is technically bearish on the daily timeframe. Prices are trading below the daily 20 SMA and the MACD has crossed to the downside. As long as prices can keep below the 2.9150 resistance there may be a decline to the next relevant support at 2.8000.

USDSGD

The USDSGD is technically bearish on the daily timeframe. Prices are trading below the daily 20 SMA and the MACD has crossed to the downside. As long as prices can keep below the 1.3950 resistance, there may be a decline back to the next relevant support at 1.3750.

GBPCAD

The GBPCAD is in the process of turning technically bullish on the daily timeframe. Prices are trading above the daily 20 SMA but the MACD has yet to cross to the upside. The next relevant resistance is based at 2.0550.

AUDNZD

The AUDNZD is technically bearish on the daily timeframe. A breakdown below the 1.0650 support may open a path to the next relevant support at 1.0400.