Maybank FX Tech Flash: EUR - Takes A Beating From ECB - 19 May 2015

EUR:  Takes A Beating From ECB

        EURUSD made a sharp decline to an intra-day low of 1.1160 after EC’s Coeure comments early this afternoon that the ECB intends to increase its purchases of euro-area assets in May and June ahead of an expected low-liquidity period.

        We continue to reiterate that ECB-US Fed monetary policies remain on a divergence. ECB has only begun QE in Mar 2015, while the US is contemplating about tightening which can come as soon as this year. We maintain our long-standing view for the US FOMC to begin its first rate hike in Sep 2015 against a backdrop of improving outlook on growth, job market and inflation.

        While short-term technicals suggest a bearish divergence possibly towards 1.1050/60 levels or even 1.0920 (50 DMA), we caution that the pair remains highly volatile as weekly technical is still suggesting a bullish bias, possibly towards 1.18 levels (38.2% Fibonacci retracement of 1.3993 – 1.0458) if the pair manages a weekly close above 1.1450 (15 May close).