EURUSD Drops Through Moving Average; German Court Ruling Impacts On ECB’s QE Programme

  • EURUSD tests key moving average level.
  • German court ruling may impact on ECB’s recovery plans

EURUSD Declines though 20-Day Simple Moving average (SMA)

The left chart shows the daily time frame of the EURUSD. Price is challenging the black 20-day SMA support. If it crosses below and the SMA turns down it will be a bearish development for the currency pair. The right chart shows the hourly time frame. Here, the green 5-hour EMA has pulled away from the orange 10-hour EMA (aqua ellipse) and the RSI remains on the weak side of 50 (green rectangle).  The EMAs also show angle and separation which denote downwards momentum.

German Constitutional Court Rules Against ECB

The German constitutional court has ruled that the ECB violated the principle of proportionality of its monetary policy. In effect it has given the ECB three months to fix its asset purchases programme. I.e. the 7-to-1 ruling said the QE programme is not backed by European treaties, and ruled that the Bundesbank is no longer to take part in QE unless a new decision by the ECB demonstrates that the programme is not disproportionate to the “economic and fiscal policy effects resulting from the programme.”

If this decision rattles the market, participants may look to take risk-off positions. This would likely see funds flow to cash (USD), and thus continue to put pressure on the EURUSD pair.