EUR/USD analysis: Draghi smashed the EUR, US NFP next catalyst
|EUR/USD Current Price: 1.1184
- ECB's new TLTRO and change in forward guidance on rates sent EUR/USD to its lowest since June 2017.
- US economy expected to have added 180K new jobs in February, wages seen advancing.
The shared currency fell to a low against the greenback of 1.1205, a level that was last seen in June 2017, as the ECB came out with a much more dovish-than-expected conclusion to its monetary policy meeting. The central bank changed its forward guidance on rate hikes, stating that would remain at their present levels 'at least through the end of 2019, and in any case for as long as necessary,' a change from the previous 'through the summer of 2019.' Furthermore, Draghi & Co. announced a new series of quarterly targeted longer-term refinancing operations (TLTRO-III), which will be launched in September this year and will last until March 2021. The ECB downgraded this year growth forecast to 1.1% from the previous 1.7%, while inflation for this year is now seen at 1.2% vs. 1.6% in December. During the press conference, Draghi acknowledged that the near-term growth outlook is weaker-than-anticipating, blaming weakness mostly to external factors. Also, several members presented the option to change forward guidance on rates to March 2020, adding pressure on the EUR. The greenback, on the other hand, benefited from better-than-expected employment data, relevant ahead of the NFP release this Friday. For the week ended March 1, weekly unemployment claims resulted at 223K, better than the 225K expected, while the Unit Labor Cost in Q4 increased to 2.0%, more than doubling the previous reading. Furthermore, Nonfarm productivity in the same period increased by 1.9%.
Friday will be a quite busy day, as it will kick start with Chinese February Trade Balance data with the focus on US-China trade deficit, later followed by the US Nonfarm Payroll report. The US economy is expected to have added 180K new jobs in February, while the unemployment rate is foreseen at 3.9%, below the previous 4.0%. Average hourly earnings are expected to have risen by 0.3% MoM and by 3.3% YoY. Such numbers could give the greenback an additional boost, particularly against weaker European currencies.
Ahead of the Asian opening, the pair trades near its daily low, at around 1.1180, its lowest since June 2017. Despite short-term oversold, the risk remains poised to the downside, with room for further slides and the next probable bearish target at 1.1160, where it has several weekly highs and lows from the past years. In the 4 hours chart, technical indicators maintain their sharp downward slopes, the RSI currently at around 14, while the price plunged after failing to recover ground above a bearish 20 SMA, now around 1.1305 and extending its slide below the larger ones.
Support levels: 1.1160 1.1120 1.1085
Resistance levels: 1.1200 1.1235 1.1280
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