EUR/USD holds around 1.1130 currently
The pair is within touching distance of the year’s low of 1.1107 and traders are waiting to see if the ECB can provide them with the catalyst to tip price below the threshold or bounce back up a little ahead of Draghi’s press conference.
Going into the ECB policy decision later, we’ll have to look at two parts:
Monetary policy decision/statementThis comes at 1145 GMT where we’ll know whether or not the ECB chooses to cut its deposit facility rate. Expectation for that remains a coin flip but I reckon the central bank may not pursue such an option without updated forecasts and the fact that they may need more time to debate what is the right stimulus “package” to deploy.
Should that materialise, I would expect the euro to pick up a little bit of a bid but be mindful that surely Draghi will be extra dovish in his press conference later on as such.
ECB president Draghi press conferenceI don’t see any which way Draghi can escape from being dovish today but the question will be how dovish does he need to be? That will depend on the first part above. If they do introduce a 10 bps rate cut, then that will ease the burden on him to push down the euro.
That said, he will still have to communicate future easing plans in order to keep markets believing that the central bank stands ready to unleash an array of stimulus measures if need be after the summer.
As for EUR/USD, looking at the bigger picture:
Support around 1.1100 remains key from a technical perspective and a drop below that today could open up a slippery slope in the pair towards testing the 1.1000 handle next.
If we do see such a break, the euro should stay pressured ahead of the Fed meeting next week and if Powell & co. solidifies the notion of a “one and done” rate cut, I reckon there won’t be much support for EUR/USD as we dribble below the 1.1000 handle.