Euro slides as Draghi talks down inflation and growth prospects
Eurozone economic concerns
The euro currency remained under pressure for most of the trading week as concerns grew about the ongoing economic slowdown in the eurozone. The ECB kept interest rates and monetary policy unchanged this week as widely expected, with ECB President Mario Draghi striking a more dovish tone towards the EU economy. ECB President Draghi said that economic data had worsened and the balance of risk was now tilted to the downside. Flash PMI manufacturing estimates for the first month of the year from the German and French economies came in weaker than expected, while the overall eurozone economy posted it weakest PMI manufacturing reading since 2013.
- The EURUSD pair is strongly bearish while trading below the 1.1300 level, key support is found at the 1.1260 and 1.1214 levels.
- If the EURUSD pair trades above the 1.1380 level, further gains towards the 1.1460 and 1.1500 levels remains possible.
The British pound enjoyed strong gains against the US dollar, Japanese yen and euro currency this week as the UK economy posted strong jobs and wage data. Investors also increased bets that the United Kingdom would avoid a hard-Brexit scenario as the Irish DUP party backed British PM Theresa May’s Brxit plan. Sterling advanced above the 1.3100 level, marking the British pounds highest trading level against the greenback since early November 2018. The British pound also moved to a fresh 2019 trading high against the Japanese yen and hit a new multi-year low against the euro, making the pound the best-performing currency in the foreign exchange market this week.
- The GBPUSD pair is bullish while trading above the 1.2990 level, key resistance is found at the 1.3170 and 1.3300 levels.
- If the GBPUSD pair trades below the 1.2990 level, sellers may test towards the 1.2890 and 1.2810 levels.
The cryptocurrency market experienced another low volume trading week, with Bitcoin and Ethereum moving in increasingly narrow trading ranges. Bitcoin and Ethereum sellers failed to build on early week bearish momentum as overall trading volumes slumped to historically low levels. Litecoin fell to a fresh 2019 trading low in early week trade, hitting $28.00, although the eight largest cryptocurrency by market capitalization quickly recovered higher and staged an impressive rally back towards the $33.00 resistance level.
- The LTCUSD pair is bullish while trading above the $33.00 level, key resistance is found at the $42.00 and $50.00 level.
- If the LTCUSD pair declines below the $30.00 level, sellers may test towards the $28.00 and $25.00 levels.
Japanese data weakens
The Japanese economy posted much weaker than expected Exports and PMI manufacturing data this week, as the Sino-US trade war started to cause a ripple-effect to neighbouring Asian economies. Japanese exports tumbled -3.8 per cent during the month of December, marking the biggest decline in Exports in over two years for the world’s third-largest economy. Japanese PMI manufacturing data also came in much weaker than expected during December, with the headline PMI showing a 50.0, which is a sharp decline from the November reading.
- The USDJPY pair is only bearish while trading below the 109.60 level, key support is found at the 108.90 and 108.10 levels.
- If the USDJPY pair trades above the 109.60 level, buyers may test towards the 110.40 and 111.00 levels.