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Draghi gives a boost to euro bulls

On Tuesday, the common European currency has been appreciating across the market during the European session. Head of the ECB, Mario Draghi, talked about the Eurozone’s economic recovery at the institution’s annual forum on central banking. The euro shot up immediately against the dollar by 52 pips, reaching 1.1235. At the time of writing tis review, the euro is trading at 1.1270. A day earlier, Draghi had said that interest rates should be kept low in order to restore growth, but these comments didn’t cause any such violent reaction as we’ve witnessed today.

Euro bulls, having broken 1.1230, are now looking towards 1.1320 (the upper boundary of the channel of the 4-hour timeframe). There is an intermediate resistance at 1.1276. It’s difficult to say how things will develop around this level. Firstly, the EURGBP cross has reached the resistance at 0.8835 (it could still rebound). Secondly, with a growing euro, US 10Y bond yields have shot up 1.66% to 2.126%. This isn’t the first time that euros and bond yields are moving in the same direction. Now it’s a question of which one will give up first.

The dollar is falling across the market, so euro bulls, armed with the support of the crosses, are forcing the bears to retreat. There is a support level at 1.1250. If sellers manage to shift it within the next 2-3 hours, then we could see the correction continue as far as 1.1235. According to a CBI report (Confederation of British Industry), the balance of sales volumes from retailers came out at 12% against a forecast and previous reading of 2%. The pound reacted to this news with a jump to 1.2772 against the dollar, but was then pushed back to 1.2734 by the EURGBP cross. According to the latest data, it’s now trading at 1.2764.

After Mario Draghi’s and Mark Carney’s speeches, trader attention is now turning towards Janet Yellen.

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