The EUR/USD drops to 14-Month Low below $1.31 after ECB unexpectedly cuts key interest rates by 0.1 % to 0.05%. The ECB also lowered the rate on the deposit facility to -0.2% from -0.1% and the marginal lending rate to 0.3% from 0.4%.
The euro has come under huge selling pressure over the last couple of trading sessions on back of news that the ECB would be introducing certain easing measures in order to kick start a flagging eurozone economy. Investors and analysts across the board expected the ECB to act as the dismal economic reports out of the Eurozone have led investors to raise questions about the strength of the Eurozone recovery.
The ceasefire agreement between Ukraine and Russia has also played a pivotal role in helping the Euro bounce back post the sell off as there is market wide speculation about further sanctions not being imposed on Russia which could have seriously dented any recovery. Traders and investors would also be looking forward to the US unemployment data to be released tomorrow to gauge the strength of the US labour market which would provide traders with an insight about the next steps to be taken by the Federal Reserve with regards to the short term interest rates. Investors believe any hike in interest rates would be hugely negative for the Euro.
On the hourly charts for the EUR/USD the currency cross the support level at $1.31400. The momentum indicator for the EUR/USD has given a sell signal which is indicative of momentum shifting towards the sell side. The relative strength index too, has given a sell signal which is a cause of concern for all euro bulls.
Short EUR/USD at current levels for a short term target at $1.3100 with a stop loss at $1.3153.