• EUR/USD reversed its direction after rising to 1.1830 area.
  • ECB left its policy settings unchanged as expected, revised its guidance.
  • USD regathered strength during the American trading hours.

After spending the first half of the day moving sideways in a tight range around 1.1800, the EUR/USD pair gained traction and climbed to a daily high of 1.1831 before reversing its direction. As of writing, the pair was losing 0.25% on a daily basis at 1.1763.

ECB’s new guidance hints at dovish shift in outlook

As expected, the European Central Bank (ECB) left the interest rates on the main refinancing operations, the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.50%, respectively. In its policy statement, the ECB revised its forward guidance to note that it will allow a temporary overshoot of inflation before taking policy action. 

Commenting on the ECB’s policy statement and President Christine Lagarde’s remarks, “promises made, promises kept – European Central Bank President Christine Lagarde has delivered a dovish policy shift, exceeding market expectations and defying hawkish members,” said FXStreet analyst Yohay Elam. “That should keep EUR/USD depressed even if the dollar remains on the back foot.” 

ECB Quick Analysis: Three dovish changes hit EUR/USD, more could be in store.

In addition to the renewed EUR weakness, the USD’s resilience caused EUR/USD to continue to push lower during the American session. With Wall Street’s main indexes struggling to extend the two-day rally on Thursday, the US Dollar Index edged higher and was last seen posting small gains at 92.87.

The data from the US revealed on Thursday that the Initial Jobless Claims rose to 419,000 in the week ending July 17, compared to analysts’ estimate of 350,000.

On Friday, the IHS Markit will release the preliminary Services and Manufacturing PMI report for the euro area, Germany and the US.

Technical levels to watch for