The EUR/USD pair initially fell and dropped below the current support for a brief while, but the attempt to break down below failed amid a weakening of the dollar seen after Mario Draghi’s speech and disappointing data from the housing market. Support is set at 1.23, resistance at 1.24.
Mario Draghi gave a speech in the European Parliament before the economic affairs comittee. European Central Bank’s head said the slack in the euro zone economy may be bigger that it was considered before and this may slow down inflation growth, but such situation will be only temporary and prices are projected to rise. EBC’s head comments suggest the central bank is convinced that inflation is still in uptrend. This supports markets expectations that the quantative easing program would come to an end if inflation reaches the target level.
Draghi’s speech supported the euro, while the dollar got hit due to disappointing numbers from the housing market, which seems to lose momentum. Data showed that new home sales dropped last month by 7.8% to 593k level, although a reading of 645k was expected by the markets. Jerome Powell, Fed’s new head will give his first testimony in Congress today. It is expected that Powell will sound optimistic about the economy outlook, but may suggest patience about inflation growth, which is still below the target rate set by the Fed.
Pic.1. EUR/USD chart.
Although the first numbers today will be seen in the euro zone, the markets’ attention will be focused on the events in the US. The dollar may find support after Jerome Powell’s testimony and good data on trade balance and durable goods orders. Any kind of disappointment may bring a rebound and a possible move towards the current resistance.