Why the Euro falls and how long it will last
For those looking for key market triggers, we suggest to keep an eye on Draghi’s and Yellen’s speeches later this day. Although neither of them are supposed to spend all their time on the interpretation of their monetary policies, there is a great possibility that these events will create a certain stir in the markets. Especially when the Fed is going to raise its interest rates this year and the ECB is determined to turn to its QE measures once again.
Beyond the aforementioned events, don’t forget about the Industrial and consumer confidence figures coming on Thursday. There might be a slight drop which may negatively affect the EUR. There will be another release on Friday – Eurozone Unemployment rate, which also doesn’t promise any improvements of the EUR exchange rate. So, we recommend you to protect your shares in portfolio ahead of this key releases.
The euro sank to $1.1218 from Monday's peak of $1.1279 as stock and bond prices in Deutsche Bank dropped to their record lows on worries regarding a $14 billion fine from the US Department of Justice.
Meanwhile, it is impossible to project how future data will influence the quotes or how the current market picture will respond to the Drahi’s speech and releases. We wouldn’t recommend to gamble on the euro improvement in a short term, when the Eurozone is struggling to go round of the potential pitfalls. But in perspective, especially if the ECB decides to embrace the Japanese yield targeting and there is no expansion of the QE in December, the Euro will appreciate again.
On the EUR/USD daily chart, we can observe the euro’s decline since Monday. There is a support line at 1,118 which can be broken out and strengthen the downward movement of the euro, if Yellen sounds hawkish at today’s meeting. The resistance line lies at (the 50% Fibonacci retracement level).