ECB kept interest rates unchanged at 0.0%, however disappointing comments by Mario Draghi weakened the EUR. The bank reaffirmed yesterday, that its QE program would end this year and that it would hike its interest rates after summer 2019. Overall, the accompanying statement was similar to the previous one, implying a consistency in the policy guidance. However, the bank may have failed to convince the market about the future course of the inflation, hence doubts about ECB’s rates remain. Analysts point out that the risk is therefore to the downside for the EUR, as the guidance that interest rates will stay at current levels through summer 2019, may be pushed back. Overall, the bearish sentiment for EUR could continue today as financial releases could prove unfavorable for the EUR and credit ratings for France, Germany and most importantly Italy, are due out today.

EUR/USD dropped yesterday, breaking the 1.1385 (R1) support level (now turned to resistance). We continue to retain a bearish outlook for the pair as the downward trendline incepted since the 16th of October remains intact. It should be noted that the RSI indicator in the 4 hour chart remains near the reading of 30, implying an overcrowded short position. Should the pair continue to be under the market’s selling interest, we could see it breaking the 1.1345 (S1) support line and aim for the 1.1300 (S2) support level. Should on the other hand, the market start favouring the pair’s long positions, we could see the pair breaking the 1.1385 (R1) resistance line and aim for the 1.1430 (R2) resistance level.

Pound drops as Brexit fears reemerge

The prospect of a no deal in the Brexit negotiations weighs on the pound, which weakened against the USD yesterday. Media headlines report, that in case of a no Brexit deal, UK’s GDP could be lower, as much as 1.6% lower (if compared to a soft Brexit), reaching +0.3% yoy, fueling Brexit fears. Also media reports, show there to be a halt in the Brexit negotiations, due to disagreements within the UK team. We fear that such disagreements could be reflected at the negotiating table, weakening the position of UK. ECB president Mario Draghi, mentioned that the longer the negotiations drag on, the more should businesses prepare for a hard Brexit. We see the case for inner political disagreements, as well as a difficulty to reach consensus for the Irish border agreement and a possible alternate plan, to increase substantially the risks of a hard Brexit. The pound seems to currently remain under pressure and the UK’s credit ratings, which are to be released today, could increase volatility.

EUR/USD dropped yesterday, breaking the 1.2850 (R1) support level (now turned to resistance). We continue to retain a bearish outlook for the pair as the downward trendline incepted since the 16th of October remains intact. It should be noted, that the RSI indicator in the 4 hour chart remains below the reading of 30, implying an overcrowded short position. Should the bears continue to dictate the pair’s direction, we could see it breaking the 1.2780 (S1) support line and aim for the 1.2700 (S2) support level. Should bulls take over on the other hand, we could see cable breaking the 1.2850 (R1) resistance line and aim for the 1.2920 (R2) resistance level.

In today’s other economic highlights:

In the European session we get Germany’s GfK Consumer Sentiment indicator for November. In the American session, we get from the US the preliminary GDP growth rate for Q3 and the Baker Hughes oil rig count. As for speakers, ECB governor Mario Draghi speaks.

EUR/USD H4

Support: 1.1345 (S1), 1.1300 (S2), 1.1250 (S3)

Resistance: 1.1385 (R1), 1.1430 (R2), 1.1480 (R3)

GBP/USD 4H

Support: 1.2780 (S1), 1.2700 (S2), 1.2630 (S3)

Resistance: 1.2850 (R1), 1.2920 (R2), 1.2965 (R3)