EUR/USD price has a muted reaction to the ECB’s decision to maintain its ultra-easy monetary policy. But will the banks’ persistence force the Euro lower?
EUR/USD shows no change on the day and is trading at $1.1794.
Today the European central bank doubled down on its commitment to revive the flagging Eurozone economy. Only two weeks after the ECB agreed to lift its inflation target to 2 per cent, the central bank has now followed the path of the Fed and revealed it is prepared to let inflation overshoot the threshold.
Additionally, policymakers also agreed to maintain deposit rates at -0.5% until such a time the 2 per cent inflation target is achieved. Following the Frankfurt meeting, the ECB said its new guidance would “underline its commitment to maintain a persistently accommodative monetary policy stance to meet its inflation target”.
Furthermore, the ECB will maintain the current pace of Bond purchases via the PEPP (Pandemic Emergency Purchase Programme) until the end of the COVID crisis.
It was expected the bank would maintain the -50 bps interest rate policy. And to some extent, the pace of PEPP. However, the ECB’s revised inflation target suggests the timeline for policy normalisation has been kicked further down the curve. This may result in downward pressure being applied to the EUR/USD price.
Euro technical outlook
The daily price chart shows the Euro has been steadily declining against the Dollar for the last two months. And following May’s failure to breach the $1.2250 resistance level, the EUR/USD price has declined almost 4%.
The technical outlook has subsequently deteriorated, and the pair is now trading below the 50, 100 and 200-day moving averages.
Furthermore, the 50 DMA at 1.2009 may soon complete a bearish crossover of the 200 at 1.2007. This underscores the recent negative sentiment.
An obvious downside target is a horizontal support level at 1.1645, offered by the November 2020 low.
In saying that, the Relative Strength Index is starting to reverse higher from an oversold reading, and therefore, the price is vulnerable to a shock higher.
Although, until the Euro advances beyond the 200 DMA, the bears will have the upper hand.
EUR/USD price chart (Daily)
Follow Elliott on Twitter.