Top 10 Takeaways from April ECB Meeting

After leaving interest rates unchanged this morning, the European Central Bank is doing everything in their power to talk down the euro this morning and based on the price action of the currency, investors are hearing them loud and clear. While Mario Draghi said the late Easter could be clouding the data and causing the weakness in March, he spent most of his press conference talking about the possibility of additional easing and outlining the ways they could increase stimulus. He was unusually specific in saying that Quantitative Easing, another rate cut, negative deposit rates and a narrower rate corridor were all discussed at the meeting. For the first time this year, Draghi also shared his greatest fear, which is stagnation. These comments alone tell us that there's no question that the ECB's primary goal today was to harden their dovish bias. We still think the bar for additional easing is high because the central bank did not see an intensification of deflation and expects price pressures to pickup in April. However this may not stop the euro from falling as the ECB is looking to increase stimulus at a time when the Federal Reserve is reducing the amount of support provided to the U.S. economy on a monthly basis.

Here are our Top 10 Takeaways for the ECB Rate Decision and their implications for the euro. While it may appear that there are the EUR positive comments offset the negatives, Draghi's emphasis on the possibility of more stimulus is the most important takeaway from today's comments.

Top 10 Takeaways from April ECB Meeting

1. ECB Does Not Exclude Further Easing with Conventional and Unconventional Measures - EUR Negative
2. QE, Rate Cut, Negative Deposit Rates & Narrowing Rate Corridor all discussed at meeting - EUR Negative
3. EUR becoming increasingly important but not a policy target - EUR Negative
4. Recovery Proceeding as Expected, Data Consistent with Moderate Growth, Late Easter Clouding Data - EUR Positive
5. Risks to Economic Outlook Still Downside - EUR Negative
6. ECB Says Biggest Fear is Protracted Stagnation - EUR Negative
7. Council Disagreed on how March data affect s Medium Term Outlook -EUR Positive
8. CPI is not as weak as PPI- EUR Positive
9. Deflation Risks have not increased, Pickup in Prices Expected in April - EUR Positive
10. ECB Happy with Forward Guidance- EUR Positive

There is support in the EUR/USD at 1.3700 and if the currency pair breaks below this point, the next stop will be 1.3650. A rally back above 1.3835, the 61.8% Fibonacci retracement of the 2011 to 2012 decline in March is needed to erase the downside momentum but we think EUR/USD is headed lower not higher.