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EURUSD Slumps after Germany’s Constitutional Court Ruling on ECB QE


EURUSD slumps to daily lows giving up over 50 pips after Germany’s Constitutional Court reach a 7-1 ruling that partly dismisses the ECB QE program to support the eurozone economy. The Constitutional Court did not find a violation of the prohibition of monetary financing of EU Member State budgets. The decision does not concern any financial measures taken by the EU or the ECB in the context of the current coronavirus outbreak.
The court said that the bond-buying program partially violates the German constitution and some of the program is not valid in Germany. The court also noted that the EU treaty does not back the ECB decision.

Germany’s central bank, Bundesbank will be banned from participating in the QE asset purchase program and sell any holdings in three months, unless ECB adopts a new decision that demonstrates in a comprehensible manner that the monetary policy objectives pursued by the ECB are not disproportionate.

The bottom line is that it will take another three months before ECB can take any significant action and that is not good news for the countries in the North and the euro. The “Whatever it takes” language from ECB ends today. We are waiting for a comment from ECB.

On the economic data, the European Monetary Union Producer Price Index came in at -1.5%, below the forecasts of -1.3% in March, the yearly reading came in at -2.8% below the expectations of -2.6%.

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EURUSD Price Support and Resistance

EURUSD is 0.61% lower at 1.0937, making fresh daily lows after Germany’s Constitutional Court place some barriers to ECB QE program. Yesterday the pair breached below the 50-day moving average and bears are back in the driver’s seat. The new hurdle to a common response to the coronavirus will weigh on the common currency. It looks like the euro holds relatively well after today’s decision and the dismal economic data from Eurozone.   

On the downside, first support for EURUSD stands at 1.0825 the daily low. Next support level would be met at 1.0811 the low from April 28. If the EURUSD pair breaks that support level, then the next target for sellers is at 1.0723 the low from April 24. 

On the contrary, the first resistance for the EURUSD pair stands at 1.0926 the daily high. If the pair breaks that resistance then the next target is at 1.0962 the 50-day moving average. The next resistance for the EURUSD pair is at 1.0999 the 100-day moving average. 

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