FX Market Summary 04-24-2014: Draghi Keeps Euro Pegged Back

Market conditions have remained subdued and EUR/USD volatility dipped to the lowest level since 2007 as traders were unable to break the recent deadlock. The latest German IFO data was stronger than expected with the overall conditions index strengthening to 111.2 for April from 110.7 previously. EUR/USD was able to make some headway following the data, but again struggled for any significant traction and settled in familiar ranges.

The latest speech from ECB President Draghi was broadly a re-hash of his recent comments with little in the way of fresh rhetoric. He continued to warn that Euro strength would have a potentially negative impact on the Euro-zone economy and that there would need to be an easing of monetary policy to compensate. There was the potential for negative deposit rates or quantitative easing, but the ECB Chief did not escalate verbal intervention against the Euro.

The comments did succeed in curbing Euro buying and the pair dipped lower, but downside movement was still very limited with EUR/USD holding above 1.3800 due to on-going support from structural factors such as capital repatriation.

Trends in commodity prices were important with gold and silver prices both coming under significant selling pressure ahead of the US open. Gold retreated to 10-week lows with silver also breaking significant technical support levels. The retreat had a negative impact on the Australian dollar with AUD/USD unable to recover from the previous day’s setback and moved lower towards 0.9250 support.

The US jobless claims data was weaker than expected with an increase to 329,000 in the latest week from a revised 305,000 previously, although this still suggested a solid labour market. The durable goods orders data was above expectations with a headline 2.6% increase for March and an underlying 2.0% gain.

EUR/USD was subjected to fresh selling pressure following the data with a retreat to test support below the 1.3800 level. Solid buying support emerged below this level with a quick recovery back above 1.3800. USD/JPY was unable to move above the 102.65 level and dipped sharply in the first hour of Wall Street trading with lows below 102.10 as bulls capitulated.

The latest UK CBI retail sales survey strengthened to 30 for April from 13 previously which helped boost confidence in Friday’s official release. GBP/USD was unable to make a fresh attempt on key resistance in the 1.6850 area with immediate selling interest at lower levels, but it was resilient on dips towards 1.6760 as EUR/GBP edged back towards 0.8220.

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