Euro falls sharply after a German court seeks answers on QE

The euro declined sharply today as the market reacted to a court ruling in Germany. The ruling by the constitutional court asked the European Central Bank to justify its vast quantitative easing program within three months. The court also asked the German government and parliament to take actions against the QE in its current form. In the past six years, the ECB has acquired assets worth more than €2.2 trillion and is currently running a €750 billion program to cushion the region from the pandemic. While the practice of printing money has worked to provide liquidity, conservatives in Germany have always argued against it. 

The Australian dollar wavered in reaction to the RBA interest rate decision. In the decision, the bank left interest rates unchanged at the current 0.25% in a bid to provide more support to the economy. However, unlike the ECB, Fed, and BOJ, the bank said that it was starting to taper its asset purchases. Still, the bank said that it was ready to resume the quantitative easing program if needed. Further, the bank expects the unemployment rate to hit 10% and inflation to remain below its target of 2% this year.

The Swiss franc weakened significantly against the USD as the market reacted to new economic data from Switzerland. The first data from SECO said that consumer confidence declined to a record low of minus 56 in the previous month. It also showed that people in Switzerland were mostly concerned about the economy and jobs during the month. Other data from the statistics office showed that consumer prices dropped by 0.4% in April from the previous increase of 0.1. On an annualised basis, the headline CPI dropped by 1.1% from the previous minus 0.5%. These numbers point to a sharper contraction of the Swiss economy this year.

EUR/USD

The EUR/USD pair declined to an intraday low of 1.0825, which was the lowest it has been since April 29. On the hourly chart, the price is slightly below the 23.6% Fibonacci retracement level. It is also below the short and longer-term moving averages while the RSI has dropped to the oversold level. Volumes have also increased. Therefore, there is a likelihood that the pair will continue moving lower as bears attempt to test the next support at 1.0795.

AUD/USD

The AUD/USD pair reached an intraday high of 0.6460, which was the highest level since Friday. The price was also slightly above the 61.8% Fibonacci retracement level on the hourly chart. Also, the pair has been forming a bearish flag pattern as shown below. Therefore, since the price has found resistance at 0.6460, there is a possibility that it will continue moving lower as bears attempt to retest the previous support of 0.6410.

USD/CHF

The USD/CHF pair rose to an intraday high of 0.9712, which is the highest it has been since Thursday last week. On the hourly chart, the price has moved above the 50-day and 100-day EMAs while the RSI has moved above the overbought level of 70. Also, the Average True Range, which is a good measure of volatility has started to rise. Therefore, the pair may form a bullish flag or pedant as bulls and bears fight for control before the price continues to rise.