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Euro plunges to lowest level in two years after ECB’s dovish monetary policy decision

Market Focus

U.S. stocks fell Thursday to cap another losing week on Wall Street as investors digested a seires of bank earnings and reeled from more red-hot CPI numbers. The S&P 500 and tech-heavy Nasdaq Composite each settled at four-week lows, recording declines of 1.2% and 2.2%, respectively. The Dow Jones Industrial Average retreated from a slight advance earlier in the session to close 0.3% lower. Meanwhile, Treasury yields climbed higher, with the 10-year benchmark marking its biggest one-week jump to hit 2.8%, the highest level since December 2018.

Twitter Inc.’s board is considering adopting a measure that would protect the company from hostile acquisition bids, according to people with knowledge of the matter, following billionaire Elon Musk’s unwelcome offer to take the company private.

One of the options under consideration is adopting a poison pill, known as a shareholder rights plan, said people close to the matter, who asked not to be identified discussing private deliberations. Twitter could announce the poison pill as soon as tomorrow. Another scenario under consideration is saying that the offer is too low, according to one person.

The Tesla Inc. chief executive officer on Thursday offered $54.20 a share in cash for Twitter, valuing the social media company at $43 billion. Musk, who said it was his “best and final” offer, had already accrued a stake of more than 9% in Twitter since earlier this year. Twitter’s board met Thursday to review Musk’s proposal to determine if it was in the best interest of the company and all of its shareholders. The company declined to comment on the offer or the board’s strategy.

A poison pill defense strategy allows existing shareholders the right to purchase additional shares at a discount, effectively diluting the ownership interest of the hostile party. Poison pills are common among companies under fire from activist investors or in hostile takeover situations.

Main Pairs Movement:

The American dollar was once again firmly up, although it has given up some of its recent gains ahead of the close as speculative interest booked some profits ahead of the Good Friday holiday, when most financial markets will be closed.

The Euro pair plummeted to 1.0765, its lowest in two years, following the European Central Bank’s dovish monetary policy decision. The ECB kept rates on hold as widely anticipated and repeated that it would end its bond-buying program in the third quarter of the year. Monthly net purchases will amount to €40 billion in April, €30 billion in May and €20 billion in June.

Cable settled around 1.3070, down for the day but off intraday lows. Commodity-linked currencies, on the other hand, closed the day near their daily lows against the greenback. Aussie was trading in the 0.7410 price zone, while Loonie hovered around 1.2615. The USD/JPY pair settled around 125.90.

Gold closed the day by 0.22% lower at $1,,973.40 a troy ounce. Crude oil ended in the green for the third conseccutive session on Thursday as the Russian oil ban takes effect. Inflation-related concerns pushed US government bond yields towards their recent multi-year highs. The yield on the 10-year Treasury note peaked at 2.835%, and is now standing at 2.82%.

Technical Analysis:

GBPUSD (4- Hour Chart)

GBPUSD fell hard toward 1.3000 on renewed US dollar strength, which was boosted by the ECB’s dovish speech and rising US bond yields. From the technical perspective, the outlook of GBPUSD has turned to the downside as it falls back to the descending trendline and below the 20 Simple Moving Average. At the time of writing, the British pound is attempting to defend its support level at 1.3064. failure to defend this level would re- confirm GBPUSD’s bearish momentum toward 1.2974. The RSI indicator on the four-hour chart has stayed slightly above the midline, implying that GBPUSD might still have rooms to move further south. On the flip side, GBPUSD needs to climb back above the resistance level at 1.3120 in order to reclaim its positive stance.

Resistance:  1.3120, 1.3165, 1.3211

Support:  1.3064, 1.2974

XAUUSD (4- Hour Chart)

Gold gave up some ground on Thursday amid the resurgence of the US dollar’s demand. From the technical perspective, the four-hour chart for gold shows that it continues to trade above the midline of Bollinger band, suggesting that gold has stayed in a bullish mood. The RSI indicator has slightly turned lower, but it is still hovering within the positive levels, indicating prevalent buying interests. To the upside, if gold eventually can break through the resistance at $1975, it will re-confirm the upside momentum and accelerate toward the next hurdle at $2001.

Resistance: 2001

Support: 1975, 1950, 1916

EURUSD (4- Hour Chart)

EURUSD slid to fresh two year lows below 1.0800 as the ECB leaves its policy rates unchanged. From the technical perspective, the intraday bias remains bearish since EURUSD continues to trade within the descending trendline and below the 20 and 50 Simple Moving Averages. In the meantime, the RSI indicator remains below the midline, suggesting an absence of buying interests. The MACD continues to edge in the negative territory, lending supports to bears. At the moment, 1.0758 would be the support pivot for the pair, and failure to defend the level would accelerate the bearish momentum.

Resistance: 1.0932, 1.1039, 1.1126

Support: 1.0758

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