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Post-ECB Euro Weakness Extends, EURUSD Prints Six-Month Low

FOREX
  • Despite a very brief spike on the moderately surprising 25bp hike from the ECB, downgrades to Eurozone growth forecasts and a potentially dovish signal on rate guidance has prompted some significant weakness for the single currency on Thursday.
  • Since the decision and President Lagarde’s press conference, any upticks for the single currency have been met with solid supply. EURUSD has continued to edge lower over the course of the US session, extending intra-day lows and most recently piercing a key support level from earlier this year.
  • The May 31 low at 1.0635 has represented the key short-term support and a sustained breach will solidify the current downtrend in place. Below here we have 1.0611, the 38.2% Fibonacci retracement Sep’22 - Jul’23 upleg, before 1.0516 the Mar 15 low and a key medium-term support.
  • EURJPY has now crossed below its 50-day EMA at 156.95 but more notably, the likes of EURAUD, EURCAD have extended losses to over 1%, as the more optimistic tone for equity markets adds particular weight to Euro crosses.
  • Elsewhere, the USD index is rising 0.58% on the back of better-than-expected US August retail sales data, leaving little to support a bearish near-term US growth view. Higher US PPI figures are also underpinning the greenback resilience.
  • In response, the trend needle in GBPUSD (-0.70%) continues to point south and the pair has traded to a fresh cycle low today, a few pips below the 124.00 handle. This confirms a resumption of the downtrend and maintains the bearish price sequence of lower lows and lower highs.
  • Chinese industrial production and retail sales overnight will be the next important release for global risk sentiment. For the Eurozone, final French CPI and Italian trade balance data headline a relatively quiet regional docket. On the US side, empire state manufacturing, industrial production and UMich sentiment data will be released. ECB president Lagarde is also scheduled to speak again, due to hold a press conference at the Eurogroup meeting, in Spain.
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