Christine Lagarde: “Neither a Dove nor a Hawk” at First ECB Meeting

As expected, the ECB left Deposit Rates on hold at -0.5%

As expected, the ECB left Deposit Rates on hold at -0.5% in Christine Lagarde’s first meeting as President of the ECB.  The ECB reiterated forward guidance and expects rates at present levels until “inflation outlook robustly converges to a level sufficiently close to, but below, 2%”.  The Committee also said that they have all tools available to combat low inflation, however they did raise their inflation outlook slightly for 2022 to 1.6%. As a result, there was a pop in many of the EUR pairs, however they were quickly negated.  In the Q&A afterwards, Christine Lagarde mentioned that Europe is not near “Japanification”, while proclaiming she is “neither a dove nor a hawk but aims to be a wise owl”. 

Source: Tradingview, City Index

The move higher in EUR/GBP could be attributed to the comments, but also the lack of liquidity due to the pending results of the UK Elections today.  (Although technicals should never be relied upon to trade in isolation, they should play less of a factor, or even no factor at all, today because the elections for GBP pairs.)

EUR/USD had a quick pop as well, however on a daily chart price kissed the 200 Day Moving Average and pulling back.  Although the day is still far from over, a close below 1.1135 would form a shooting star, which is an indication of a possible move lower.  Also notice how each time over the past 2 months EUR/USD has traded up to 1.1150 it has been rejected.  There is also a downward sloping trendline from late September which comes across near 1.1160.  If price can get above those resistance levels, the 61.8% retracement from the Jun2 21st highs to the October 1st lows sits just above at 1.1207.

Source: Tradingview, City Index

Horizonal support comes across at 1.1107, and then the 38.2% and the 50% levels from the low on November 29th to today’s highs.  Below there is horizontal support at 1.1030.

Source: Tradingview, City Index

(As of the time of this writing, it appears a trade deal between the US and China may be finalized.  DXY is moving higher and EUR/USD lower.   This continues to be a fluid situation. )

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.