EURUSD is a big mover today on somewhat unexpected comments from the ECB’s Mario Draghi. The Bank’s president chose to address monetary policy during his speech in Portugal and drove EURUSD higher.
Draghi was surprisingly dovish during the last policy meeting in June so few expected him to drift away from that stance during a potentially low-key speech in Portugal. While the ECB president stopped short of making some big announcement, his message was clear.
Draghi said that euro zone growth was above trend and all signs pointed to strengthening and broadening recovery. While he stressed that moves need to be prudent and moderate, it was obvious that the hidden message included tapering of bond purchases in a not-too distant future. As a result, EURUSD broke higher from around 1.1190 to test 1.1250. Keep in mind that the pair was in a consolidation so this message could be an impulse that drives the pair towards fresh highs.
Technically EURUSD remains in an upswing from its historic lows from the beginning of this year. Despite a pause in a aggressive uptrend started in June, the trend is still pointing to the north. Current consolidation, in the range of 1.1113 and 1.1294 is located near the top suggesting a continuation of the trend. Area between 1.1380 and 1.1616 act as a major supply area and a reaction from this zone is likely, although it could be just a minor correction.
While we see a consolidation on higher time frames, we could be already looking at a rally on H1 interval. Do notice that even ahead of Draghi’s speech price respected rising 50 and 75 moving averages as supports and a break higher through a cluster of levels just above 1.12 could encourage buyers. Investors could consider joining this trend on another retest of moving averages or even during a retest of 1.1220 that could now act as a support.