11:23, 11 June

Daily analysis

Settles Above Key 1.13 Level After ECB Pushes Back Rate Rise Deadline

In the last week or so the EURUSD has surged higher to its highest levels in three months and in doing so has pushed through the resistance at the key level of 1.13. Over the last couple of months the EURUSD has been well supported by the 1.11 level and on several occasions it appeared as if the currency pair was poised to move through this level to a two year low.

Several weeks ago the EURUSD attempted to rally higher towards the resistance at 1.13, however it formed a classic reversal candlestick pattern before easing lower. In doing so, it continued to achieve lower peaks and lower troughs which is why it looked perfectly setup to threaten the recent troughs around 1.11.

Given the strong medium term down trend, the recent surge higher to the three month high is significant. Back in April, the EURUSD attempted to climb back above the key level of 1.13 and after meeting resistance there for around a week, it was thwarted and sold off reasonably strongly falling to the two year low. In early February the EURUSD was sold off after running into resistance at the other key level of 1.15, and it maintained a trading range between 1.13 and 1.15 for the most part of the last six months. With the recent break higher, it may look to resume this trading range and in due course, make another attempt at 1.15.

On numerous occasions earlier this year, the EURUSD enjoyed rock solid support from the key 1.13 level so it will be interesting to see if this level kicks in again and props the currency pair up. 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.

Last week at their latest policy meeting the European Central Bank (ECB) said it would delay its next interest rate rise until at least the middle of next year.  Market participants are increasingly hopeful ECB President Mario Draghi could signal further monetary support before his departure in October, as fears of a global recession and trade tensions have hit markets again.  In a statement, the ECB said that it "now expects the key ECB interest rates to remain at their present levels at least through the first half of 2020."  "The prolonged presence of uncertainties related to geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets is leaving its mark on economic sentiment,” Draghi said in a news conference.  “Looking ahead, the governing council is determined to act in case of adverse contingencies.”  Draghi explained the governing council “stands ready to adjust all its instruments as appropriate.” This should ensure inflation continues to move towards the ECB’s aim in a “sustained manner.”