EUR/USD is above its monthly opening range supported by the Relative Strength Index breakout from the downward trend since July. Nevertheless, the pair struggles to extend the previous week’s gains as the US dollar weakness abates. Traders are watching whether it can retrace the earlier fall from the yearly high at 1.2011.
The European Central Bank officials’ comments indicate not much probability of a currency intervention; this means the EUR/USD will be dependent on the risk sentiments surrounding the US dollar.
The pair’s advance from the monthly low of 1.1696 might sustain as the ECB indicates a continuation of the current monetary policy. Chief Economist Philip Lane told the Wall Street Journal “not so much that the central bank is looking at the exchange rate per se, it’s the implications for the European economy and inflation.”
The ECB economist added that the state of global demand is more important than the exchange rate of euro, echoing the earlier comments from Vice-President Luis de Guindo that any dispute on exchange rates would be suicidal at this stage.
Lane said that it is vital to have a fiscal policy that is active and responds to the needs of the economy, considering the current situation. Markets expect the Governing Council to stay put at the next meeting on October 29. He said that ECB sees as the baseline case a lot of recovery in the fourth quarter and next year, and eliminating the whole gap in 2022.
The key market trends would dictate EUR/USD moves as the traders have been net short in the pair since the middle of May. At 9:42 AM UTC, the EUR to USD pair was trading down -0.15% at 1.1792.