How Lagarde’s speech will affect EUR?

The ECB’s president Christine Lagarde warned about the complicated economic recovery. Bears got stronger.

Summary of Lagarde’s report

• The head of the ECB claimed that “the recovery will be incomplete and may be transformational”.
• She emphasized that the return to pre-crisis levels is unlikely to happen soon.
• It will be especially hard for airline, hospitality and entertainment industries to get out of the current downturn. Also, she added: “there will be industries that will arise from those changes”.
• The ECB poured 1.52 trillion dollars into the EU economy through its asset-purchasing program. Moreover, officials are open for further stimulus measures as they are still cautious about the second wave of the coronavirus. Investors welcomed the support from the government.

The speech didn’t influence EUR so much, but added additional pressure to the downside. Let’s look what other factors may have an impact on EUR.

Main drivers for EUR

• The US-EU relationship may deteriorate as the USA plans to impose new tariffs for import from the EU. It may be the strong headwind for the euro.
• The second round of the virus outbreak can trigger the risk-off tone and leave EUR unfavorable against safe-haven assets.
• EUR may gain on the additional stimulus measures from the ECB.
• The weak US dollar can increase demand for EUR.

Technical tips

There is the golden cross of 50- and 200-day moving averages on the EUR/USD daily chart. However, this signal is quite weak as the price went too far away from the moving averages’ area. Today the pair tumbled to the lowest level for over two weeks and formed the bullish flag pattern. The break above the top line will push EUR up. Otherwise, if it falls below the support at 1.117, it will open doors to 1.110. Resistance levels are at 1.1260 and 1.1350.

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Author: FBS Analyst Team

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