Since the beginning of the year, the single currency has risen against the greenback by 9.96% (1030 pips). Since trading opened in Europe, the euro/dollar has risen to 1.1388. ECB president Mario Draghi’s optimistic comments have led to sellers closing their short positions on the euro. Having hit a new yearly high, the euro subsequently fell from 1.1388 to 1.1298 (-90 pips). This sharp drop has occurred within the last hour. The ECB has since stated that markets misinterpreted Draghi’s words in terms of the stimulus program.
Some important resistance levels were broken on Tuesday. Because of this, if market participants take the latest comments from the ECB seriously, we should see some profit-taking if the price goes up. For some reason, though, it seems to me that the euro/dollar pair will reverse downwards after testing the 1.1445/75 area. Price swings at this level are unavoidable. Moreover, it’s unclear what kind of message Draghi will send to euro bulls today. His choice of words could send the euro back down as far as 1.1180.
The US dollar is trading down against a lot of the majors as there are a lot of planned speeches from central bank heads later: Steven Poloz, Mark Carney, Haruhiko Kuroda and Mario Draghi. The US will publish data on trade balance, pending home sales and the EIA oil rig count.
The import price index for Germany in May dropped by 0.1% MoM but rose 4.1% YoY (forecast: -0.6% MoM, 4.6% YoY, previous reading: -0.1% MoM, 6.1% YoY).
The Eurozone’s M3 money supply for May came to 5.0% per year (forecast: 5.0%, previous reading: 4.9%).
A preliminary report on Italy’s CPI for June shows a drop of 0.1% MoM, and a 1.2% rise YoY (forecast: 0.1% MoM, 1.3% YoY, previous reading: -0.2% MoM, 1.4% YoY).
The preliminary CPI core index for Italy in June has come to 1.2% YoY (forecast: 1.4% YoY, previous reading: 1.6% YoY).