EUR/USD breaks below 1.1200 amid a stronger US Dollar
- Euro hit after a more dovish-than-expected dovish ECB meeting.
- Stronger US dollar across the board reinforces the EUR/USD decline.
The EUR/USD pair resumed the decline after a short-lived recovery, breaking below 1.1200. The euro reached a fresh 20-month low and is about to post the lowest close since June 2017.
Earlier today, following the ECB meeting, the euro tumbled, pushing EUR/USD to the 1.1200 zone. After finding some support, rose to the 1.1230 area but only to drop further afterward.
The primary driver today was the ECB decision: a new round of TLTROs and a change in the forward guidance. But the last leg lower took place amid a stronger US dollar across the board. The greenback hit fresh high versus majors and also emerging market currencies. It only held steady versus the Japanese yen. Both are higher on the back of risk aversion.
The pair bottomed at 1.1175 and near the end of the session holds at 1.1185, having the worst performance in months, after losing more than a hundred pips.
The decisions taken by the ECB changed several short-term forecasts of many analysts regarding the Euro. With a delay in the normalization from the ECB, now the euro looks weaker. “The ECB has sucked the life out of EUR/USD though this should hardly come as a surprise for markets given they have largely been calling the ECB's bluff on forward guidance. Nonetheless, focus will remain on the downside for EUR/USD as the policy anchor is even more deeply buried than before. A break below 1.1216 support will have us focus on a new lower trading range in near-term marked by 1.10/1.12”, wrote TDS analysts.
Still, longer-term some forecast remain positive. “We remain of the view that the direction of ECB policy over the medium term will be toward less accommodation, even if that process is delayed somewhat. That continues to support the case for a stronger euro versus the dollar over time, in our view, even if euro gains do not come until later this year”, said analysts at Wells Fargo.
EUR/USD Short-term levels to watch
On the downside, below 1.1175, immediate support is seen at 1.1165 (Jun. 20 2017 low) and then at 1.1130 and 1.1100. On the upside, now 1.1200 is the immediate resistance followed by 1.1230 and 1.1285 (European session low).
Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
