EURUSD could be hit by ECB

2018년 9월 12일

The euro reversed its gains from the start of the week and turned lower on Wednesday, despite there is no evident risk aversion in the markets and the dollar demand is rather subdued. EURUSD has got back below the 1.16 threshold and the 20-DMA, down to 1.1570. 

The local bearish catalyst for the single currency is another dismal economic report from the euro area. The industrial production contracted further in July, while analysts expected some rebound in the output. 

So the euro looks nervous ahead of tomorrow’s ECB meeting which could hurt the pair further should the central bank points to downside risks to growth and lowers its growth outlook, citing weaker external demand amid trading wars. However, even a cautious Draghi’s tone won’t be enough to challenge the ECB’s intensions to normalize policy, at least, not at this stage. More alarming signals could emerge in case the global economy feels the real effect from the trade conflicts. 

Anyway, a slightly more dovish tone by Draghi than expected could fuel the current bearish correction in the EURUSD pair. The key support ahead of the 1.15 threshold lies at 1.1525.