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Euro Slams the Brakes by a 2-Year High on Draghi Caution

By Benjamin Spier
13 March 2014 18:18 GMT

Talking Points:

  • Draghi warns that single currency gains relevant to price stability
  • EUR/USD reverses 100 pips from a 2-year high

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European Central Bank President Draghi sounded caution today regarding recent Euro gains, leading to a 50 pip decline in EUR/USD. He said that Euro gains are increasingly relevant to price stability and added that the ECB will counter any material risk to inflation expectations.

Draghi also said that too-low inflation is now more relevant than too-high inflation, which was a change in language from Draghi’s comments earlier this month that inflation risks are broadly balanced. Draghi’s previous comments followed the ECB’s decision to keep the interest rate unchanged, but Draghi also warned then that ECB is ready to consider all available instruments if necessary. Therefore, any signs that the ECB is closer to reacting to lower price pressures may push the Euro lower.

EUR/USD 1-Minute: March 13, 2014

Euro_Slams_the_Breaks_by_a_2-Year_High_on_Draghi_Caution_body_Picture_1.png, Euro Slams the Brakes by a 2-Year High on Draghi Caution

That’s why the Euro declined more than 50 pips against the US Dollar on the release of Draghi’s comments. EUR/USD has fallen back 100 pips from the 2-year high set earlier today, and those looking for a continuation of bullish price action should consider waiting for a close above 1.3970, according to Senior Currency Strategist Kristian Kerr.

Chart created by Benjamin Spier using Marketscope 2.0. Add DailyFX Support/Resistance to your charts at FXCM Apps.

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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13 March 2014 18:18 GMT