09:06, 22 February

Remains Above Support at 1.13 as ECB Concerned with Trade Wars

In the last week or so the EURUSD has been able to rally back above the key level of 1.13 after having dropped to a three month. Only a few weeks the EURUSD was sold off after running into resistance at the other key level of 1.15, as it maintains it trading range between 1.13 and 1.15. A few weeks ago EURUSD enjoyed rock solid support from the key 1.13 level and subsequently surged higher back towards 1.15. 
It did hit a three month high near 1.1570 before being sold off. For the last few months now the EURUSD has been content to trade within a narrow range enjoying support from 1.13 and meeting resistance at the 1.15 level.

It is interesting to note that its recent excursion above 1.15 didn’t last long as it was quickly sold down at those three month highs. The 1.13 level has also become quite significant of late, and even though it has fallen through this level a few times, it was quickly pushed higher through strong buying which will provide some confidence that the 1.13 level will provide strong support should the EURUSD attempt to decline again.

After dropping through the 1.13 level near mid-November, the EURUSD did well to rally higher from its lowest levels in 16 months back up towards 1.15 before easing in the week afterwards. Likewise the 1.15 level has become key of late providing stiff resistance and looming above ready to push prices lower. Towards the end of October the EURUSD did well to surge higher off support at the key 1.13 level after having fallen strongly over the last few weeks from above 1.16. These instances again reinforce how significant the current key levels are.

At their last meeting, policymakers at the European Central Bank (ECB) were concerned that slowdown in economic growth might be “deeper and more broad-based” than previously suspected.The minutes from their January meeting showed that they had balance acknowledgement of worsening data with conveying confidence that the bank’s stimulus policies were working.What remains a key concern for many central banks, including the ECB is the ongoing trade wars between the United States and China, which may still result in further tariffs, or import taxes, that might further slow global trade.The minutes highlighted “concerns among members about an increasing impact of trade protections, and an escalation of trade conflicts, on the global outlook over time.” The environment “appeared to be exacting an increasing toll on the world economy,” they said.Many analysts believe the central bank could delay its next rate increase, well into 2020.“The observation was made that, in response to recent weaker than expected data, some easing in financial conditions had taken place through an outward shift in market expectations for the timing of a first rise in key ECB interest rates,” the minutes said.The minutes also said that “acute risks” surrounded the United Kingdom’s decision to quit the European Union.