Euro exchange rates: EUR boosted by surprisingly strong IFO data

UPDATE: "The EUR/USD regained the 1.3500 level in early European trade after the IFO survey of business sentiment posted its best reading in more than a year indicating that business activity in Eurozone's largest economy remains robust. The IFO printed at 109.3 - much better than the 107.7 eyed with current conditions rising to 112.2 vs. 116 forecast while expectations increased to 106.3 versus 104 projected." - Boris Schlossberg @ BK Asset Management.

Following Draghi's speech we see the euro dollar exchange rate is 0.31 pct higher at 1.3524. The euro pound exchange rate is trading 0.33 pct higher at 0.8351 and the Euro to Australian dollar rate is a percent higher at 1.4748.  

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European Central Bank president, Mario Draghi, has downplayed talk of introducing negative interest rates at the ECB.

Earlier this week vice president Vitor Constancio fuelled speculation saying: "everything is possible."

In addition, two unnamed sources from the ECB made direct reference to the possibility of introducing negative rates sending the EUR sharply lower.

"There has been a lot noise from ECB officials of late, with comments broadly centred on the toolkit available to the ECB should further easing measure be required," says today's note on the euro exchange rate from Lloyds Bank Research.

Lloyds say the reason behind the recent dovish comments from CB officials is unclear, especially so soon after the ECB announced a refi rate cut earlier this month.

"Whether this is just jawboning or perhaps there is growing concerns within the committee it’s unclear. There are a number of ECB members speaking today which could see some interest," say Lloyds.

Regarding the technical levels, analysts at Lloyds say that in the absence of a continuation of dovish comments we expect EUR/USD to remain well supported; the recent low of 1.3400 should be decent support on the downside.  

We would question the possibility of a sustained EUR recovery; the bullish USD market tone after the release of the FOMC minutes is likely to keep the EUR on the soft side in the near term.

UBS analyst Gareth Berry says technical levels will also keep the euro dollar exchange rate under pressure, "With bearish conditions intact, any recovery will be limited to resistance at 1.3579. Support is at 1.3400, a break below this would expose 1.3293."

Also likely to keep feeling the heat is the euro pound exchange rate points out Berry, "With the trending and momentum indicators pointing lower, there’s scope for test of the critical support area at 0.8301 and 0.8285. Resistance is at 0.8357 ahead of 0.8415."