EURUSD Outlook – by – Michael Oyebamiji
January 25, 2016OyebamijiLast week, the European Central governor Mario Draghi made it clear that ECB has plenty of instruments and the willingness of the governing council to act and deploy these instruments. He was speaking on the back of poor economic growth in the Eurozone economy and low inflation. This means in the next meeting in March, ECB might announce an increase in the ongoing quantitative easing.
On the back of this announcement, of more stimulus measure in the Eurozone, we saw a massive sell off on Eurusd from the high of 1.09 to the low of 1.07. European equities also rallied to see the first positive close in 2016.
From my fundamental point of view, I think any increase quantitative easing will eventually lead to more strength on Euro and a big drop on European equities. Looking at the market, we have seen massive amount of stimulus over the past 2 years from almost all central banks. I think the market is now at a stage of diminishing returns.
From a technical view, if EurUsd holds the support at 1.071, prices might rally all the way back to 1.10.
The chart below shows the levels to watch: support and resistance. A break below 1.07 might see prices drop to 1.05.
