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The single European currency fell sharply against the US dollar on Friday, after a series of statements made by the president of the European Central Bank.
In spite of this, the situation has stabilized slightly by the end of the day and the trade is currently conducted in the narrow side channel. Most likely, the pressure on the euro will continue earlier this week. With this, it is necessary to return to the intermediate level of support and to keep at the lows of last Friday.
The European currency suffered a major sell-off during a speech at the meeting of finance ministers and central bank governors in Washington. The European Central Bank President Mario Draghi voiced out his concerns over the growing protectionism from the United States, which poses a threat to the euro area economy equivalent to 10 trillion US dollars. The ECB statement will be cautious in winding down the large-scale incentive program and led to a rapid decline in the euro against a number of other currencies.
Draghi also drew attention to the fact that ECB decisions are also tied to the momentum of world economic growth.
The fall of the euro was restrained by large levels of support, and speculative buyers are currently trying to gain a foothold on them in order to break a new downward trend. However, this will not be so easy.
As for the technical picture of EUR/USD currency pair, a return to the intermediate support 1.2265 will lead to a new wave of short positions in risky assets, and to the renewal of lows in the 1.2240 and 1.2210 areas accordingly. The main goal of the euro sellers will be the lows from February this year around 1.2140. If euro buyers manage to reverse the current trend, then the upside potential will be limited in the resistance area 1.2310 and 1.2330.
The speeches of Fed representatives scheduled on Friday afternoon did not have a special support for the US dollar.
For instance, Lael Brainard stated that international trade conflicts are a significant factor of uncertainty, but prospects for the US economy talks about the further gradual increase in interest rates. Also, Brainard noted the continued high growth rates of US GDP.
FRB President San Francisco John Williams also spoke in favor of continuing the gradual rate hike over the next few years, as risks in the economy become more balanced.
Today, we should pay attention to the data on the activity index in the manufacturing sector of the euro area and the United States.
* The presented market analysis is informative and does not constitute a guide to the transaction.
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