EUR/USD Forecast: ECB left rates unchanged, expands QE
EUR/USD Current Price: 1.1227
- ECB announced an expansion of QE, introduced additional TLTRO.
- Germany to abandon balanced budget rules to fight the virus.
- EUR/USD jumps to 1.13 on steady rates, resumes decline afterwards.
The shared currency shed ground ahead of the ECB’s monetary policy decision, dumped amid continued risk-off. The WHO declared the coronavirus a pandemic, while US President Trump announced measures to palliate the economic effects of the outbreak, although markets feel it’s not enough. Nevertheless, the dollar advances against high-yielding rivals, as speculative interest rush into safety.
The market ignored positive EU data, as Industrial Production rose by 2.3% MoM in the Union in January, better than the 1.4% advance expected. When compared to a year earlier, Industrial Production was down 1.9%, beating the market’s forecast of -3.1%.
US data came in mixed, as the Producer Price Index fell in February 0.6% MoM, while the core reading, excluding food and energy prices, was down by 0.3% in the month, both missing the market’s expectations. The annual readings were also below forecast. Unemployment claims for the week ended March 6, however, were better than anticipated, down to 211K.
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The ECB has just announced its latest monetary policy decision. Rates remained unchanged, although it but will let banks run lower capital ratios due to the coronavirus outbreak. The central bank introduced additional TLTRO and expanded QE by 120B for this year. The EUR/USD pair bounced with unchanged rates but came under stronger selling pressure as the full news sink in. The pair flirted with 1.1300 before falling to 1.1197, so far the daily low. Meanwhile, Germany announced it is ready to abandon balanced budget rules to fight the virus. ECB’s head, Lagarde, is set to speak in a few minutes and will introduce further noise.
EUR/USD short-term technical outlook
The EUR/USD pair is trading near 1.1200 ahead of Lagarde speech and the US opening, bearish, as nothing seems sufficient for speculative interest. The short-term picture suggests more slides ahead, as the pair is developing below a now bearish 20 SMA, while technical indicators hold near daily lows, well into negative levels. Further slumps are to be expected on a break below 1.1180, the immediate support, while spikes will likely be seen as selling opportunities in the current risk-averse scenario.
Support levels: 1.1180 1.1145 1.1110
Resistance levels: 1.1260 1.1300 1.1340
Author
Valeria Bednarik
FXStreet
Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.
