Summary:

• ECB keep all rates and asset purchases unchanged 
• Fairly neutral press conference with Draghi 
• EURUSD bounces from prior support level but remains little changed on the day

The latest ECB event has come and gone without any major fireworks as the bank announced no changes to its policy and president Draghi refrained from a significant dovish tweak in his tone during the press conference despite recent soft data. The opening statement read out by Draghi was exactly the same as the one from the previous meeting and therefore offered very little new information for traders to go on. 

One possible observation from the unchanged statement was that in keeping the “until September 2018 or beyond if necessary” line in place the Governing Council chose against signalling an abrupt end to asset purchases. But this is really reading between the lines to be honest and if anything the fact that the statement was unchanged despite the recent softening seen in the data, with inflation rising less than expected in the most recent reading, is a slight positive. 

At least that’s the way the market seems to have taken it with the EURUSD showing a large bullish engulfing candlestick on H1 after earlier threatening to make a sustained break lower. The key swing level around 1.2155 seems to have held and now there’s a chance that short covering may push price back higher.  

 EURUSD remains above the prior swing level around 1.2155 and if this remains in tact then a push back higher may occur. Source: xStation

 The Q&A session threw up a few interesting responses from Draghi, with the following comments the most noteworthy. 

• All countries reported some moderation of growth or loss of momentum
• Momentum moderation is broad across countries and sectors
• The declines were unexpected
• the decline stabilized and the levels are still above historical averages
• The declines came after 4 quarters of growth
• Declines were mostly due to temporary factors including weather,  timing of Easter, etc.

The main takeaway here is that whilst he acknowledges the slowdown seen in both hard and soft data, the remarks suggest it is not too concerning and more importantly that at the moment it is unlikely to alter the path of monetary policy. 

Looking at shorter timeframes such as a H1 chart, the EURUSD printed a large bullish engulfing candle and may now look to recoup some of the recent declines. Fib retracements taken from the high seen last week at 1.2412 to today’s low of 1.2146 may offer potential levels to keep an eye on with the 23.6% at 1.2209 capping the first bounce. Should price drop below 1.2146 then it would pave the way for further downside and open up the possibility of a larger drop towards 1.1935. 

 If the low of 1.2146 holds in the EURUSD then fib retracements could provide levels to watch overhead with the 23.6% at 1.2209 already capping the first bounce. Source: xStation