The EURUSD is trading lower in early London trading after Sabine Lautenschläger, an Executive Board Member of the ECB, announced her resignation before the expiration of her tenure in October.
Lautenschläger, who is German and is widely known for her hawkish stance on monetary policy, did not provide reasons for her early resignation. However, speculation has it that this action is a protest response to the ECB’s decision to restart its stimulus package and ease interest rates. She has been a vocal critic of the ECB’s bond purchases and also opposed the latest dovish actions of the ECB.
Her resignation has not only reduced the number of “hawks” on the ECB board, it has also thrown up an extra vacancy on the board. ECB Board Member Benoit Coeuré is expected to complete his tenure this year as well. This could herald significant policy changes within the bank, which is also expecting to appoint Draghi supporter Christine Lagarde as the new ECB President.
Technical Outlook for EURUSD
The bearish sentiment on the EURUSD is back in force after Monday’s poor PMI data rattled the single currency. The exit of a hawk from the ECB board could reinforce this sentiment.
The EURUSD is trading in a down channel on the weekly chart. The pair is now at multi-week lows and is also approaching levels not seen since May 14, 2017. The EURUSD is also testing the support price of that day at 1.09222.
Below this level, the next support comes in at the lows seen on Nov 11 2016 and April 23, 2017 at 1.08206. This is the next short-term target that could be attained on a downside break of the 1.09222 support line.
On the flip side, if the EURUSD is able to bounce from the present support level, this could provide a retest of the previous support-turned resistance (Sep 4/23 lows) at 1.09645.