What did we learn from the ECB yesterday?

The euro went for a ride on the ECB and Draghi yesterday

A good description of traders in euros yesterday:

ForexLive

All right, I'm kidding aside. Now let's go to the details of the ECB's monetary policy decision yesterday and how it played in the EUR / USD.

The initial statement of the central bank was rather dovish and left little room for imagination afterwards. In my opinion, the most surprising thing is that they decided to mention the prioritization of rates and QE in the declaration itself.

This virtually prevented Draghi from being a little more dovish unless he decides to go into the details of prioritization and QE – which he then admitted that he There was no clear consensus and probably not even discussed (since a rate reduction was not discussed either).

But it is his hesitant language (for whatever reason, he keeps coming back to his speech in Sintra) that has helped temporarily relieve euro buyers before the markets start to turn to a recovery plan put in place in September.

The EUR / USD hit a new low in two years at 1.102, but buyers defended the barrier at 1.100 and Draghi's unusual "performance" allowed the price to hit a high of 1.188 before being positioned under the limit of 100 hours (red line).

This means that sellers remain in control in the short term, their goal now being to move away from the ECB and switch to the Fed.

As mentioned yesterday, if the ECB were not to take any stimulus this week, then it should strengthen its game in a rather radical way in September. In the current state of things, there is nothing to know whether or not they can handle that.

Some policymakers question some of the effectiveness of prioritization and QE. This could mean that we would see a more limited rate cut, but again, Draghi said that any rate reduction would be badociated with a prioritization to reduce the risk to financial institutions.

As far as QE is concerned, there are not many details to be badimilated in the markets but, in my opinion, this is not necessarily a given in September and it is a matter of contention between the traders for the moment. .

I am sure that the "ECB sources" will get more clues over the next few weeks. Let's wait and see what that means for the central bank's decision in September.

Otherwise, pay attention to more economic data to see how desperately the ECB will plunge into its recovery tools. But for now, let's prepare for the dollar side of the equation in EUR / USD starting with US GDP data for the second quarter later today.

For the EUR / USD, the upside risk is set by the AM of 100 hours and the overnight highs at 1.1167 and 1.1188 respectively. In terms of declines, the risk for buyers is that sellers manage to break through the barrier at 1.1100.