Mario Blascak, PhD
Independent Analyst
The EUR/USD is trading in a corrective mode at around $1.2240 after peaking at $1.2332 overnight. With the German inflation subdued and well below ECB’s inflation target, the spotlight has been taken by the ECB officials that influenced the markets.
First, it was a comment from the Baque de France Governor and the ECB Governing Council member Villeroy that has verbally intervened on the EUR/USD sending the currency pair lower towards $1.2210. Villeroy said that recent Euro increase is a source of uncertainty that requires monitoring because of its possible downward effects on imported prices and inflation. I warned of the ECB verbal intervention last week and it took four days for it to materialize. See details here.
Later on Tuesday, the Bundesbank President Jens Weidmann appeared in news saying that the analysts are right to expect the deposit rate hike by mid-2019. While Weidmann’s Bullish comment pushed the EUR/USD to a new 3-year high of $1.2332 overnight, Villeroy’s cautious approach is more likely to reflect a majority of the Government Council thinking in ECB, limiting EUR’s rally for now. Next week’s ECB meeting is therefore likely to see President Mario Draghi talking the EUR down as the unprecedented Euro strength is undermining the ECB’s drive to achieve its inflation target.
From the technical perspective, the oscillators including the Relative Strength Index and Slow Stochastics are both pointing downward from the Overbought territory. The Momentum is also turning lower, favoring the corrective move sideways on EUR/USD.
EUR/USD daily chart
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