Euro Stays Weak Ahead of Draghi’s Speech
The Euro remains weak especially against the Canadian dollar, as the market awaits President Draghi’s speech today. It is anticipated that the ECB in June will respond to low inflation. The market however is dark on the information regarding the tools that the ECB is willing to employ. Traders are looking to get clues from Draghi today. Analysts are speculating about possible interest rate cuts, quantitative easing and even injection of liquidity. The Euro has continued to react mildly in view of the fact that right-wing Euro-Sceptic parties rose to victory in the European Parliament elections in France and the UK.
EUR/CAD slips to 1.4794 as at the time of writing this as it experienced a continuation of the corrective fall from 1.5585. Analysts expect such a slide to a 100% projection of 1.5585 to 1.5003 from 1.5305 at 1.4723. We’ll take some caution on bottoming after touching the 1.4723 level on losing the downward strength, as we see the oversold conditions in the 1-day RSI. Seemingly, the breach of the 1.4961 resistance is required to verify short term bottoming. Asides this, the outlook remains bearish in the verge of a recovery.
The Bank of Japan’s meeting minutes for April 30th showed that board member Sato proposed to alter price assessment. He opted to mention that inflation risk was to the downside. This was however voted down by 8-1. Kirai and Kuichi also proposed to loosen the timeframe for attaining th 2% inflation target but also got voted down. The board members clearly did not agree amongst themselves, the governor of the Bank of Japan, Kuroda is still optimistic about the economy and inflation after the meeting in May.
Looking at event risk, New Zealand trade surplus was worse than expected at NZD 534 million for the month of April. The GFK consumer sentiment in Germany was unchanged at 8.5 for the month of June. There’s going to be holiday in the U.S. and the UK and as such the data calendar looks slim. The general focus for the day will remain the speech by the ECB President Draghi. Going forward the week is going to be host to few event risks. The U.S. will get quite a few economic data within the week which includes durables, personal income and the revised GDP. The Friday’s Japan’s inflation data will be the major focus of the day.
Daily technical Outlook for the EUR/GBP Pair
The intraday bias for the EUR/GBP stays unchanged for some consolidation above 0.8081 low. Below the 0.8183 is the upside recovery that should be limited and possible bring about the resumption of the slide. There would be an extension of the larger fall to a 100% projection of 0.8584 to 0.8157 from 0.8399 at 0.7972 below the 0.8081
In the broader picture, the current development suggest that the slow decline from 0.8806 is part of the long term consolidation pattern from 0.9799, instead of a correction to hike from 0.7755. Such medium term fall should be on the lookout for the low at 0.7755 and below. We’ll be searching for reversal signals for another time when the cross gets close to 0.7693 long term support level. There’s need for confirmation of the medium term at the break of 0.8399, asides which the outlook will stay bearish.
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