Draghi’s Dovish Reminder Keeps EUR/USD Downtrend Intact
- EUR/USD turns back from daily 8-EMA.
- Draghi's comments reminiscent of "whatever it takes" in July 2012.
We're almost fully through a week dotted with central bank events, culminating with four ECB policymakers speaking today (one remains at 13:00 GMT). From the onset this week, our main concern was that incoming economic data would take a back seat to speculation over what the ECB and the Fed would do next, as traders parsed policymakers speeches for clues.
ECB president Mario Draghi revealed a fairly large clue this morning when he said that the ECB would "do what we must to raise inflation as quickly as possible," a comment borne out of the same frustration over Euro-Zone growth and inflation that prompted Mr. Draghi's earlier comments in July 2012 about doing "whatever it takes" to save the Euro-Zone. President Draghi's comments today seem almost defiant, as if to say, "Markets - this is what we're doing, regardless of what you think."
EUR/USD is taking the hint this morning, backing away from the daily 8-EMA trend resistance that's kept price capped since the October 22 ECB meeting. Likewise, other EUR-crosses are looking more and more fragile: EUR/JPY is pressing weekly lows as it continues to consolidate below former triangle support; and EUR/GBP remains on track to test figures just north of £0.6900.
Lastly, as we head into next week - a holiday week that's been accompanied by low liquidity and sporadic price movements in recent years - it's worth reviewing principles that help protect your capital. We call these principles the "Traits of Successful Traders," and should make for some interesting weekend reading.
--- Written by Christopher Vecchio, Currency Strategist
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