ECB fails to push the Euro lower, EURUSD above 1.2000 into the weekly close?

September 11, 2020 10:30

Source: Economic Events September 11, 2020 - Admiral Markets' Forex Calendar

On Thursday, all eyes were on the ECB rate decision, especially the press conference with president Lagarde.

All in all, the ECB didn't deliver anything new and kept rates unchanged, while the rhetoric within the ECB statement suggested no clear tendency towards more stimulus at the ECB meeting in December.

In fact, ECB president Lagarde tried to sound dovish, saying that it is very likely that a full PEPP envelope will be used, but when looking at the push higher in the Euro on a broad scale, failed to do so.

Here are some key points to consider:

  • Eurozone inflation came in at 0.2%(MoM) last Thursday and, thus, is at its lowest level since May 2016
  • The Euro has significantly strengthened against the US-Dollar
  • Big speculators having ramped up their bullish Euro bets according to the CoT,

As such, it didn't come as much of a surprise that the ECB mentioned the 1.35 trillion euro PEPP as a target, not a ceiling.

But the market seems to want more and the "bullish feedback" leaves a good chance that the ECB will potentially deliver more dovish rhetoric or monetary support for the Eurozone economy.

That may especially prove true against the US-Dollar, which we see facing further selling pressure after FED chairman Powell spoke at his speech in Jackson Hole about an average inflation target, naturally meaning lower US interest rates for an extended period of time.

That said, we continue to see EURUSD bullish short- and mid-term, as long as the currency pair trades above 1.1700. We have not lost our expectation of seeing the EURUSD pair in a deeper run above 1.2000 in the coming 6 to 12 months:

Source: Admiral Markets MT5 with MT5SE Add-on EURUSD Daily chart (between June 03, 2019, to September 10, 2020). Accessed: September 10, 2020, at 10:00 PM GMT. Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the EURUSD fell by 10.2%, in 2016 it fell by 3.2%, in 2017 it increased by 13.92%, 2018 it fell by 4.4%, 2019 it fell by 2.2%, meaning that in five years, it was down by 7.3%.

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