Euro in Focus as Draghi Speaks

Euro in Focus as Draghi Speaks

Euro in Focus as Draghi Speaks

The Euro remains under pressure due to bad fundamentals and the view Macron will be to weak to implement reforms.

Mario Draghi’s speech in the Dutch Parliament today might allow the Euro to partially recover, he constantly attempts to talk up the Euro but never delivers any of his promises, he has failed time and again to breathe life in to the Euro.

The Euro has come under pressure over the past 48 hours after Emmanuel Macron’s win in the French Presidential elections last weekend; it has become obvious that his win was already priced in, even worse his history in Government give no one confidence, so traders looked to cash in on their long positions in favor of the Euro. At the same time, the Dollar remains the driving force behind the moves seen across most instruments since the beginning of the week having received fresh support from the Non-Farm Payrolls report last Friday.

Today though the focus will be on the Euro in light of ECB President Draghi’s speech in the Dutch Parliament; investors will look to find out how the Single currency will react to his remarks.

The problem is Draghi lies, his econimcs are those of the liberal left, socialism with a touch of stupidity. Mario Draghi has long been overly optimistic about the growth prospects of the Euro area and has understated the effects of the low inflation so today he’s expected to remain in line with his recent views. Positive remarks from Draghi today should be able to help the Euro recover part of its losses since Monday; the European currency has dropped from the 1.1000 heights to trade as low as 1.0870 yesterday evening.

For the Euro to mount a meaningful reaction from its current lows a move back above the 1.0900 level is needed; this key psychological level is the first obstacle for the Euro to the upside while at the same time technical traders will look towards the 200-period moving average situated just above this level. A potential recovery from the Euro above this resistance will create the opportunity for short-term speculators to look for profits towards the 1.0950 level while the focus stays in Europe.

At any case though, even if Mario Draghi comes out optimistic as ever and pushes the Euro higher triggering the short-term reaction discussed above traders need to be mindful of Dollar’s current momentum. The US currency has been pushing higher since Monday on the back of the NFPs and market participants are now eagerly waiting Friday’s Retail Sales report; as such, even though the Euro might benefit from the pause in Dollar’s advance today any gains should be short-lived.

Our EUR/USD Target remains 87c

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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