EURUSD capped by 1.2400, post ECB´s Coeuré speech

• ECB Coeuré: monetary policy can do little to lift the long-term growth rate of the Eurozone.
• EUR/USD bulls need to break the 1.2400 line in the sand.

The EUR/USD is currently trading at around 1.2370 after finding resistance at the 1.2400 level at the end of the Asia session. 

At 16.15 GMT on Wednesday, ECB's Benoît Cœuré made a speech called ‘Making Our Monetary Union Stronger and More Resilient’ where he said that monetary policy can do little to lift the long-term growth rate of the Eurozone. Adding that “any well-functioning monetary union depends on flexible markets, adequate national fiscal buffers and a common fiscal instrument to cope with large shocks”. On the impact of the asset purchase program, he said that the “ECB stimulus will add around one-third of a percentage point to 2018 GDP growth”. 

Earlier in the day, Mr. Draghi spoke at the ECB conference hosted by the Institute for Monetary and Finacial Stability in Frankfurt. He confirmed that he is more confident than in the past months that inflation will increase, however risks and uncertainties still persist as the ECB still need to see further evidence that inflation dynamics are moving in the right direction. On the asset purchase program (APP) he said that the stimulus is still necessary as of now.  and stressed that the key question is to know how quickly stronger demand will translate into rising prices. A dovish comment that was picked up by the market was: “Euro strength could weigh on inflation down the line”. The ECB president concluded by saying: “Monetary policy will remain patient, persistent, and prudent”. 

Earlier the US retail sales data came below expectations with sales m/m coming at -0.1% vs. 0.3% consensus. The DXY is holding steady and slightly up on the day, although still below the 90 level. 

EUR/USD daily chart

The technical picture seems to indicate that bulls will need to gather more strength to break the 1.2400 level. A descending trend line is also capping the price. 

EUR/USD 4-hour chart

The technical picture on the 4-hour chart suggests that the Euro bulls are running out of steam. A decisive break below the ascending trendline could propel the single currency to the next support level seen at 1.2300, last swing low followed by the 1.2200 psychological level. On the flip side, if the bulls manage to break the descending trendline, there seem to be little in the way until the 1.2550 level is reached (high of the year)