10:28, 19 April

Resistance Stands Firm at 1.13 as Concerns Grow over Weak Growth

In the last week or so the EURUSD has attempted to climb back above the current key level of 1.13 however has been thwarted and has now been sold off reasonably strongly falling to a one week low around 1.1225. This was telling in that the couple of weeks prior, the EURUSD had enjoyed a solid rally from below 1.12 to steadily move higher back to the 1.13 level after having fallen so sharply in the last week or so of March.
It had looked poised to threaten the previous trough and 18 month low around 1.1175 that it set earlier in the month, before the steady rally in the last few weeks.

In early February the EURUSD was sold off after running into resistance at the other key level of 1.15, and it has maintained its trading range between 1.13 and 1.15 for the most part of the last six months. Again, it is currently looking like it might struggle to return to this range as it pushes lower below 1.13. On numerous occasions in the last few months the EURUSD has enjoyed rock solid support from the key 1.13 level so it will be interesting to see if it has another rally left, now that it is receiving tough resistance from this level.

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 excursion above 1.15 earlier in the year 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, however this confidence is now almost gone.

Speaking last month at a conference on monetary policy European Central Bank (ECB) President Mario Draghi said the central bank is ready to take further action to help the economy if the outlook takes a sudden turn for the worse.  Draghi said the bank would take "all the monetary policy actions that are necessary and proportionate".  The time may be coming soon.  As recent as last week the ECB held interest rates steady on Wednesday, shortly after the International Monetary Fund (IMF) sharply downgraded its economic growth forecast for the euro zone economy.  The IMF downgraded growth in the euro zone expecting it to grow at 1.3% in 2019, which is lower than its forecast had been six months earlier.  Purchasing Managers Indexes (PMI) from Germany and France would have failed to ease fears about a euro zone economic slowdown, with German manufacturing data coming in below expectations, and France’s data showing a decline in output.  After the recent interest rate decision, President Draghi in a press conference warned that data collected in recent weeks by ECB officials had confirmed the eurozone had “slower growth momentum”.  Further, a variety of factors including trade talks / protectionism and emerging markets had negatively impacted investor sentiment in the bloc, with risks “tilted toward the downside” over the coming months.