ECB pours cold water on Euro

18 August, 2017

The Euro has been swinging heavily over the last few days as the markets continue to go through some unpleasant motions. This has been brought on by some schizophrenic USD movements as of late, but also by the EU itself, which had its monthly ECB minutes released today. Overall, it was mostly positive for the Euro-zone with policy makers agreeing that it seemed that the Euro-zone was making progress returning to economic stability - despite the Brexit debacle across the channel. In addition to this though policy makers were concerned about the EURUSD which had obviously got stronger on better fundamentals, but felt it might be overstretched at present compared to the economic data at hand. The market was of course quick to react to such statements, and the EURUSD had a sharp drop, which was followed up by strong US economic data around the labour rates later in the afternoon.

The question remains then where should the EURUSD be placed at present on the charts. Right now we've been seeing large wicks appearing on the charts that are symptoms of the bears taking a very solid swipe. However, so far, traders have managed to keep the price above support at 1.1719, though there is a serious question around how much more pressure it can take. The 20 day moving average has also jumped up the charts and was acting as dynamic resistance today and is starting to turn lower, it could be the case we see further downward pressure leading into tomorrow. In the event the bears do take control and head lower then support at 1.1621 is likely to be the main target for traders. If the bulls can however take control and force it upwards then I would expect to see resistance retested at 1.1800 and finally another crack at resistance at 1.1915. However, despite this all be careful of the current state as the EURUSD has been struggling under all the pressure at present.

The Australian economy was boosted overnight by labour market statistics being released showcasing the economy is booming. The employment sector expanded by 27.9K (20k exp), while the participation rate lifted to 65.1% (65.0 prev). These are good figures from the Australian economy which has been struggling since the commodities sector took after the global financial crisis. It does however boost the chance going forward that the RBA might be forced to act in the long run and boost interest rates again. Markets will certainly be keen to hear the coming statements from the RBA in the next few months as a booming economy could put pressure on the RBA to act.

On the charts the AUDUSD has certainly been a little bearish as of late, but the strong jump the other day and the labour market stats have helped immensely. Today's USD figures also put pressure on the AUD, but it has remained above support at 0.7900 and this level is looking quite strong. If the market looks to extend further I would expect a rise up to the 0.8000 level and with more positive economic data a push through. 

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