EUR/USD – Euro Hits 23-Month Highs on Draghi Comments

The euro has steadied in the Friday session, after strong gains on Thursday. Currently, EUR/USD is trading at 1.1650. On the release front, there are no events in the eurozone or the US. On Thursday, the ECB made no changes to interest rates or its quantitative easing (QE) program. In the US, the numbers were a mixed bag. Unemployment claims dropped to 233 thousand, marking a 9-week low. The news was not as positive on the manufacturing front, as the Philly Fed Manufacturing Index slowed down to 19.5, its weakest reading since November 2016.

The ECB didn’t make any moves at its policy meeting, but that didn’t stop the euro from posting strong gains on Thursday. EUR/USD has gained 1.6% this week, and earlier on Friday, the pair hit its highest level since August 2015. As expected, the ECB opted to hold steady with its monetary policy, keeping interest rates at 0.00% and the QE scheme at EUR 60 billion/month. The QE program is scheduled to end in December, and any change to that date could have a significant impact on the euro. At his press conference, ECB President Mario Draghi sounded upbeat about the eurozone economy, noting there were signs of “unquestionable improvement” in the eurozone economy. As for monetary policy, Draghi said the bank had not set an exact time for revisiting any changes to the current accommodative policy, but added that policymakers would review policy in September. These comments did not seem to break any new ground, but were perceived as hawkish by the markets and triggered a euro rally.

With the ECB standing pat at its policy meeting, what can we expect from the bank in September? As OANDA Senior Currency Analyst Craig Erlam explains, the markets should be prepared for some significant moves at the September policy meeting:

The most likely decision, despite the central bank still falling well short of its inflation target, will be to cut its purchases by another €20 billion as it did in April and extend by another six months. There has been a lot of speculation about a more explicit phasing out but I think the ECB want to be more careful given the fragile nature of the recovery. The result will likely be the same though with the central bank ending its quantitative easing program either at the end of 2018 or early 2019.

EUR/USD Fundamentals

Friday (July 21)

• There are no eurozone or US releases

EUR/USD for Friday, July 21, 2017

EUR/USD Friday, July 21 at 5:45 EDT

Open: 1.1628 High: 1.1677 Low: 1.1619 Close: 1.1654

EUR/USD Technical

EUR/USD recorded strong gains on Thursday, breaking through two resistance lines. On Friday, the pair has posted small gains

• 1.1616 is providing support
• 1.1732 is the next resistance line

Further levels in both directions:

• Below: 1.1616, 1.1534, 1.1465 and 1.1366
• Above: 1.1712, 1.1876 and 1.1996
• Current range: 1.1616 to 1.1712

OANDA’s Open Positions Ratio

EUR/USD ratio remains unchanged this week. Currently, short positions have a majority (69%), indicative of EUR/USD reversing directions and moving lower.

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