Euro volatile as ECB leaves rates unchanged and pledges to do more
The FTSE 100 declined today as the market reacted to the bombshell announcement by Royal Dutch Shell. When announcing the first quarter earnings, the company said that it would slash its dividends for the first time in decades. The management said that the stop was necessary due to the falling crude oil prices and lack of demand. The announcement came a few hours after Reuters reported that Chesapeake Energy was making early steps to bankruptcy. As a result, the share prices of other oil companies declined today. Elsewhere in Europe, the DAX index, CAC, and Stoxx declined by 0.40%, 0.35%, and 0.42% respectively.
The Japanese yen rose against the USD even after Japan released some disappointing numbers. Earlier today, data from the country showed that household confidence dropped to 21.6 in April from the previous 30.9. Housing starts declined by 7.6% in March. This was better than the expected decline of 16% and the previous decline of 12.3%. Meanwhile, other data showed that industrial production dropped by 3.7% in March after declining by 0.3%, while retail sales fell by 4.6%. These numbers send a signal that upcoming numbers will be worse because the country is now in a state of emergency.
The euro was relatively volatile as the market digested the latest interest rate decision by the ECB. As was widely expected, the bank left interest rates unchanged and said it was ready to continue supporting the economy by continuing with the current EUR 750 billion asset purchases. It also pledged to provide more funds to banks at ultralow interest rates. This decision came a few hours after we received weak GDP, unemployment, and inflation numbers. The eurozone’s economy contracted by 3.8% in the first quarter while the unemployment rate rose to 7.4%. In March, preliminary core CPI data dropped from the previous 1.0% to 0.9%. Headline CPI dropped from the previous 0.5% to 0.3%.
The USD/JPY pair declined to an intraday low of 106.54 as the market reflected on data from Japan and the FOMC decision. On the four-hour chart, this price is along the 50% Fibonacci retracement level and slightly below the 28-day and 14-day exponential moving averages. The price is also being guided by the descending blue trendline. Therefore, if the pair manages to move below the 50-day EMA, there are chances that bulls will attempt to test the 61.8% retracement level at 105.19.
The NZD/USD pair declined to an intraday low of 0.6115 as the recent bull run started to lose steam. The price moved from yesterday’s high of 0.6152. On the hourly chart, the price is along the 25-day exponential moving average and slightly above the 50-day EMA. At the same time, the RSI has started moving lower. Therefore, there is a likelihood that the pair will continue falling and retest the 23.6% retracement level at 0.6096.
The EUR/USD pair struggled for direction as traders reacted to the slew of economic data and the ECB rates decision. On the hourly chart, the pair is trading at 1.0876, which is closer to the day’s high of 1.0891. The price is also slightly above the short and medium-term moving averages. It is also between the 50% and 38.2% Fibonacci retracement level. Therefore, bulls may attempt to move the pair past the 61.8% resistance level, and the day’s high at 1.0891.