ECB president Mario Draghi emphasized at latest speech in Frankfurt forum downside risks in euro area for both price and growth outlook. Draghi at the end of the speech repeated his commitment to boost price and assured that ECB is still not short of instruments to deliver its mandate. Below target inflation was confirmed by weak figures from Germany and surprisingly also from Spain yesterday, despite it is still growing more than twice times faster than euro area average. Negative circumstances such as weak global trade growth, brexit and China´s slowdown put additional risk on export-oriented eurozone economy, dampening price pressures. Interest rate hike by ECB is moved to 2020 definitely. According to us even rate hike in the first quarter of the year 2020 seems really unlikely, because of planned change of the ECB president at the end 2019.
On other side, chairman of the FOMC Jerome Powell at last meeting turned on ,wait and see mode´, with possibility of no hike in 2019. Unlike the ECB, this scenario seems maybe too dovish - the core inflation still holds around 2 percent and strong labor market with unemployment at 3.8% getting even more tighter. Solid economic growth, forecasted about 2.2% this year can be also sustained in 2020 as it is a year of presidential elections. Based on these fundamental facts, long-term outlook for EURUSD is bearish.
Technical outlook also confirms bearish bias. When you look at broader picture at weekly candle chart, price is getting under weekly 200 MA right now - confirming descended channel from May 2018 and head and shoulders pattern from the beginning of the year 2017. Short-term target at 1.10 EURUSD can be tested relatively fast. In longer-term the move under 1.10 looks like the most probable option.