The European Central Bank pledged on Thursday to keep rates low for an extended period and to support the Eurozone economy until inflation stabilizes at 2% on a sustainable basis. As expected, the refinancing rate remained at zero and the deposit facility rate at -0.5%, their lowest level ever.
ECB President Christine Lagarde stressed at the press conference that the outbreak of the epidemic attributed to the rapid spread of the Delta variant of the SARS-CoV-2 coronavirus posed a risk to the economic recovery that has begun in the eurozone, citing a “growing source of uncertainty”.
These uncertainties support the ECB's decision to maintain its ultra-accommodating monetary policy, especially since the annual inflation rate in the eurozone fell slightly in June, to 1.9%, after having reached 2% in May.
Currently, investors are counting on a faster normalization of U.S. monetary policy than in Europe, thanks in particular to the more robust health of the economy in the United States.
Graphically, the EURUSD is still unable to regain height and the bearish flow is still very present. It is clear that since the bottom of the uptrend channel towards $1.1930, the euro has been deepening its losses. Moreover, long bets on the US dollar are reaching their highest level since June 2020.
For now, prices are working the support at $1.1755 but buyers do not seem to be coming forward to defend this level. As such, we believe that EURUSD should continue its slide towards $1.1710 in the coming days.
In the absence of a technical signal or a bullish catalyst, sellers have the upper hand.
(Chart Source: Tradingview 22.07.2021)
However, the $1.1710 - $1.1720 level is a monthly support zone, so a rebound is possible on this key threshold. The market should potentially stabilize initially and then make a bullish restart.
Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.
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