EURGBP Rebounds
Among the major currencies, the euro lost the most ground to the US dollar in yesterday’s trading. EURUSD dropped from its intraday high of 1.1108 to finish the day with a 39-pip loss at 1.1052.
Aside from fears of the coronavirus weighing down market sentiment, weakness on EURUSD was mostly driven by the ECB. The central bank did not make any changes to its interest rate level which is currently at 0.0%. Its asset purchase program was also held steady at 20 billion EUR per month. These were widely-expected by investors. Initially, the reaction on EURUSD was muted. The currency pair even traded higher on ECB President Lagarde’s comments that economic data supported their view that the economy is growing at a moderate pace. She also remarked that underlying inflation picked up while global risks went down.
However, the euro sell-off started when she said their outlook for inflation is subdued. To make her speech more bearish for the euro, she said that dampened international trade combined with remaining risks to global growth could take its toll on euro zone investments. Consequently, this hinted that the central bank’s accommodative policy will remain for an extended period of time.
Today, a handful of reports are due from the euro zone which could stop or exacerbate the slide on EURUSD.
At 8:15 am GMT, the French services PMI and manufacturing PMI for January are due. They are seen to print at 52.2 and 50.6, respectively. Then at 8:30 am GMT, the German manufacturing PMI is seen at 44.5 while the services PMI is eyed at 53.0. Finally, at 9:00 am GMT, the version of the reports for the whole euro zone will be released. The region’s services PMI is anticipated at 52.9 while the manufacturing PMI is estimated at 46.9.
ECB President Lagarde is scheduled to make another speech today at 9:30 am GMT. However, she is not expected to discuss monetary policy in her speech about “Global Economic Outlook.”
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On the 4-hour time frame, we can see that the currency pair has been consolidating throughout this morning’s session. It could be a sign that sellers may soon take a break from pushing EURUSD lower. If this turns out to be the case, a close above the Asian session highs at 1.1058 could mean that the currency pair may soon trade higher to 1.1100. This price may serve as resistance because the falling trend line (from connecting the highs of December 31 and January 15) coincides with it. Additionally, the price aligns with the 50% Fib level when you draw the Fibonacci retracement tool from the high of January 16 to yesterday’s low.
However, if sellers continue to dominate today’s trading, a drop below yesterday’s low at 1.1035 may mean that EURUSD is headed to 1.0995. This price served as a support level on November 13 and November 27.