The weekend comments from Draghi are the strongest attempt so far to cap EUR/USD ahead of 1.40.
Friday’s close of 1.3885 will be put to the test after he tied monetary policy directly to the euro.
“The strengthening of the exchange rate would require, to make our monetary policy stance to remain equally accommodative, it would require further monetary policy accommodation.”
It’s not the most-delicately worded sentence but it says — if the euro rises, we’re going to cut rates.
The thing is, various attempts by different ECB members last week were ineffective. They less direct than Draghi’s comments but had virtually no effect. The euro posted solid gains in 4 of the past 5 days with the lone exception or Friday, where it closed down just 5 pips. This might be an excuse for a retracement but I’d like to see at least a 30 pip fall in the first few hours of trading. And of course, no move matters unless it can stand up through the European open.