As expected the ECB remained on hold at 0.0%, yet had a clearly dovish approach in its accompanying statement and economic projections. The bank changed its forward guidance on interest rates and announced new targeted longer-term refinancing operation (TLTRO). The bank also had some downward revisions regarding its economic forecasts as now the headline inflation rate is expected to slow down reaching 1.2% yoy for 2019 and the GDP growth rate to reach 1.1% yoy. In his press conference ECB president Mario Draghi stated that the measures are aiming at lifting inflation and are adding accommodation, while at the same time denied that there were any discussions for cutting the deposit rate. We expect the EUR to remain under pressure despite its relative stabilization in the Asian session today. EUR/USD tumbled yesterday, breaking all of our support lines and stabilising during the Asian session below the 1.1215 (R1) support line (now turned to resistance). We expect the pair to remain under pressure as currently the common currency remains in a weak position, yet the pair might prove sensitive to the release of the US employment report for February. Please note that the RSI indicator in the 4 hour chart has dropped well below the reading of 30, implying a rather overcrowded short position. Should the bears continue to dictate the pair’s direction, we could see it breaking the 1.1165 (S1) support line and aim for lower grounds. Should on the other hand the bulls take over, we could see it breaking the 1.1215 (R1) resistance line and aim for the 1.1260 (R2) resistance barrier.
GBP weakens on Brexit impasse.
The GBP dropped yesterday against the USD, as the negotiations between the UK and the EU have reached an impasse. EU negotiators rejected the latest proposals on the Irish backstop presented by Britain’s attorney general Cox. UK government sources, stated that there seems to be little hope for something to change in the next days adding to the pessimistic outlook. Analysts pointed out that the market gets conflicting messages from London and that negative news are flowing from Brussels, keeping the pound in tight range and under pressure we would add. Cable dropped testing the 1.3070 (S1) support line, yet failing to break it. We could see the pair maintaining bearish tendencies today especially should the Brexit impasse persist. On the other hand the pair may prove sensitive to the release of the US employment report for February. Should the pair remain under the selling interest of the market, we could see it breaking the 1.3070 (S1) support line and aim for the 1.2990 (S2) support barrier. Should on the other hand the market favour the pair’s long positions, we could see it aiming if not breaking the 1.3175 (R1) resistance line.
Today’s other economic highlights
In today’s European session we get Germany’s factory orders growth rate for January. In the American session we get the US employment report for the February as well as Canada’s employment data for February. As for speakers ECB’s Yves Mersch will be speaking. On Saturday during the Asian session we get China’s inflation measures for February and take a special notice of Fed Chair Jerome Powell speaking. On Sunday no major releases are expected as well as during Monday’s Asian session.
GBP/USD
Support: 1.3070 (S1), 1.2990 (S2), 1.2900 (S3)
Resistance: 1.3175 (R1), 1.3270 (R2), 1.3360 (R3)
EUR/USD H4
Support: 1.1165 (S1), 1.1125 (S2), 1.1080 (S3)
Resistance: 1.1215 (R1), 1.1260 (R2), 1.1300 (R3)
