The European Central Bank (ECB) shocked the financial markets on Thursday afternoon by unexpectedly acting again in its ongoing battle against low inflation levels. Not only did the ECB cut interest rates to a new record low 0.05% but the central bank also raised negative deposit rates to 0.2%. Furthermore, the ECB announced plans to launch an asset purchase program. This unexpected news sent the EURUSD to its lowest value in over a year (1.2919).
The equally surprising news that the United States only created 142,000 new jobs in August gave the sudden downward movement in the EURUSD some breathing space, with the 1.2919 area now emerging as the next featured support level for the pair.
In other news, there was optimism following suggestions from German economic releases that the EU’s main GDP contributor was returning to form. German Industrial Production recorded its strongest month in over two years during July, with a 1.9% increase. This was subsequently followed by the impressive news that Factory Orders rose by 4.6% in the same month.
This week, economic data from the European Union is lower in quantity. The most noticeable releases include German Trade Balance (Tuesday) German CPI (Wednesday) and the latest EU unemployment statistics (Friday). It is also being suggested that further Russian economic sanctions will be announced at the beginning of the week, which should weigh on the EURUSD.
In regards to the technicals on the Daily timeframe, a bearish channel remains in control of the overall EURUSD direction. However, we are now moving further towards the lower end of the channel and if the pair is going to following technical patterns, a consolidation of losses is possible. This would be helped if there are further signs that German data is returning to stability. Equally, the surprisingly poor US NFP could encourage concerns that the Federal Reserve will delay monetary tightening.
Support levels can be found at 1.2940, alongside the current yearly low, 1.2919. If the EURUSD is going to return to the 1.30 area, resistance can be found at 1.3013 and 1.3051.