ECB Leaves Policy Unchanged


DraghiToday’s monthly European Central Bank monetary policy decision saw the ECB leave policy completely unchanged, and an indication that rates will be left alone for several months yet. This is no surprise to anyone however, analysts are increasingly concerned that the Eurozone may be entering a slowdown as growth in the three largest Eurozone economies, Germany, France, and Italy, shrank to almost zero in the final quarter of 2018. Recent days have also seen greater and more detailed concern of the small but locally serious impact that a “no deal” Brexit may have upon certain sections of the Eurozone economy, most notably the German car industry and the fishing industries of western European members.

Technically the Euro is in a long-term downwards trend, but it is a weak one. This suggests that both the technical and fundamentals are increasingly converging to align against the Euro, so if you like to use fundamental analysis as a filter for your trades, short Euro trades might be attractive to you.

At the time of writing Mario Draghi, President of the ECB, has just taken a more dovish stance, saying that recent information suggests risks have moved to the downside, and he acknowledged a weakening of the momentum of economic growth. Upon these remarks, the Euro fell against the Dollar to reach the next support level of 1.1306, which appears to be holding.

I suspect that 1.1306 may hold. If the price does get established below it, we would be seeing a five-week low, and a possible additional push down to 1.1200 could take us into much more long-term lows. EUR/USD is often difficult for trend traders as it tends to make such deep counter-trend movements most of the time, but it is worth remembering that statistically, it is one of the most reliably-trending of the major Forex currency pairs.

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.