Mario Draghi’s cautious tone during Thursday’s ECB press conference was unable to tame the rampant euro bulls, sending the euro/U.S. dollar (EUR/USD) currency pair to levels not seen since January 2015, to above 1.2050.
The Euro’s aggressive appreciation continues to suggest that bullish investors have built immunity into Draghi’s dovish mantra, with most focusing on Europe’s encouraging macro fundamentals and QE tapering expectations. While Draghi stated that the recent volatility in the euro required close attention and is a source of uncertainty, investors seemed to be more interested in the stronger than expected Eurozone growth seen so far this year. What really gave the euro bulls a shot in the arm, was when Draghi stated that the bulk of the QE decision will be made in October.
The EUR/USD also found ample support in dollar weakness, which encouraged bulls to start renewed rounds of buying. Technical traders will be paying close attention to see if prices can stay above 1.2000. A breakout above 1.2080 should encourage a further incline higher towards 1.2140.
Dollar bears unstoppable
King dollar was beaten black and blue by sellers this week, as expectations rapidly faded over the Federal Reserve raising U.S interest rates in December.
This has been another painful week for the beleaguered currency, as the combination of dovish comments from Federal Reserve Governor Lael Brainard, and reports of Federal Reserve Vice Chairman Stanley Fischer announcing his resignation, compounded the downside. Sentiment remains heavily bearish towards the dollar moving forward, with further weakness expected as heightened political uncertainty in Washington and diminishing rate hike expectations weigh heavily on the currency.
From a technical standpoint, the dollar Index is bearish on the daily charts. Sustained weakness below 91.00 should encourage a further depreciation towards 90.00.
Gold shines as dollar tumbles
Gold’s glimmer has attracted investors like a moth to a flame, with the metal appreciating to a yearly high above $1,355 during Friday’s trading session.
Jitters created from the tensions between North Korea and the United States have attributed to gold’s resurgence, while a weaker dollar amid fading rate hike expectations, continues to fuel the upside. With uncertainty across the board and overall caution likely to stimulate the flight to safety, safe-haven assets such as gold remain heavily supported. From a technical standpoint, the yellow metal is heavily bullish on the daily charts. There have been consistently higher highs and higher lows while prices are trading above the daily 20 SMA. The breakout above $1,350 may open a path higher towards $1,365. Daily bulls remain in firm control and are likely to secure more control if gold concludes the week above $1,340.
Currency spotlight – USD/CAD
The Canadian dollar appreciated to a two-year high against the Greenback on Friday, as market players continued to digest the unexpected rate hike by the Bank of Canada.
A vulnerable dollar has also played a leading role in the U.S. dollar/Canadian dollar (USD/CAD) currency pair’s decline, with further downside expected as market players weigh on the prospects of more rate hikes by the Bank of Canada. From a technical standpoint, the USD/CAD is heavily bearish on the daily charts. Sustained weakness below 1.2100 should encourage a further selloff towards 1.2000 and 1.1930, respectively.