Draghi talks down the Euro, can the US Dollar capitalize on that?

General market theme
A lack of follow-through towards any direction and the apparent weakness of the major Forex currencies remains the broader market theme since the beginning of the year. The US Dollar that was expected to play a key role in early 2016 after the Fed rate hike is finding it hard to build any momentum. The UK Pound is on the decline for a couple of weeks as well and now that BoE Carney made it clear that no rate hikes should be expected this bearish ride is to continue.

What we found out yesterday though is that the ECB is also on a bearish bias and President Draghi was pretty clear on his remarks after the monetary policy meeting. They are concerned about the fall in oil prices and the slowdown in emerging markets and more QE is on the table. This outlines the outlook for the Euro that has just turned bearish and we are looking for the currency to weaken moving forward.

Price action highlights
The Euro was the main player during yesterday’s session and the Single currency came under strong pressure when ECB President Draghi hinted towards more QE in the next couple of months unless something spectacular happens.

The Euro dropped rapidly below the 1.0800 level to print an intra-day low of 1.0780, corrected to test the 1.0900 level during the US session but later declined again. As we mentioned above more bearishness should be expected from the Euro, rallies to the upside should be approached as selling opportunities especially if the Dollar starts to pick up some pace.

Focus of the day
Traders will focus on the European session today with a couple of second-tier reports pending for release. The Manufacturing and Services PMI levels from the Eurozone are expected to print lower adding to the pressure that Draghi brought to the Euro and fresh lows might be in the card.

Also this morning the UK Retail Sales report will be released with analysts expecting the consumer demand to have slowed down, the Pound is already bearish and that could bring in more sellers against the UK currency.

Economic Calendar

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