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EUR/USD: life after ECB

Kira Iukhtenko, FX BAZOOKA analyst

EUR/USD extends the bearish correction on Tuesday, pulling back from a 2-year high of $1.3915 hit right before the US nonfarm payrolls release on Friday. The pair had a clear need for a bearish correction after the last week’s 200-pips rally on the ECB-provoked euphoria.

To be honest, it is still a question whether the ECB meeting outcome is as positive as it was understood by the markets. We have to remember ECB revised its 2014 inflation forecast to the downside. What’s more, Draghi admitted the geopolitical risks and the emerging markets crisis threaten the EZ economic prospects. As we see from the above, there is still a chance for the ECB rate cut in the coming months. The ECB vice president Vitor Constancio confirmed the idea on Tuesday: “Policy stance does not mean we are on hold in terms of policy regardless of the development of the situation”.

However, the fact remains: ECB was much less dovish than it was expected by the market and strengthened the fundamental support for the single currency. Will that be enough to change the market sentiment into a long-term bullish? All eyes on $1.4000 in the coming weeks. Weekly close above here would open the way to the new unseen highs.

Let’s shortly discuss the short-term prospects of the euro. The intraday pullback found support at $1.3830. In my view, the market remains clearly bid as long as the $1.3720 support holdslook to buy the pullbacks. If the bulls regain control, there is a high chance to break above $1.3915 and to hit $1.4000. 

Chart. Daily EUR/USD

To contact the writer of this story:

Kira Iukhtenko, analytics@fxbazooka.com 

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