EUR/USD steadies above 1.1150 as ECB-inspired volatility softens

• ECB leaves benchmark interest rate unchanged at 0% on Thursday.
• ECB President Draghi says Governing Council did not discuss rate cuts.
• US Durable Goods Orders rebound sharply in June.

With the initial reaction to the European Central Bank's policy statement, The EUR/USD pair lost its traction during the European trading hours and slumped to its lowest level in more than two years at 1.1101. However, the pair quickly reversed its course during ECB President Draghi's press conference and climbed to a daily high of 1.1187. Following these sharp fluctuations, the pair has started to consolidate its daily gains and was last seen trading at 1.1160, adding 0.2% on the day.

Draghi stole the spotlight

As expected, the ECB announced that it kept its policy rate unchanged at 0%. In its statement, however, the bank noted that it tasked the relevant Eurosystem committees with assessing options to be used if medium-term inflation consistently remained below the ECB's target. According to the statement, these options include ways to reinforce its forward guidance on policy rates, mitigating measures, and options for size and composition of potential new net asset purchases.

During the presser, Draghi adopted a neutral tone, saying that they need to see more data before making a change in the policy and told reporters that the Governing Council did not discuss a rate cut at this month's meeting and repeated that the risk of a recession in the eurozone was still very low.

Commenting on the market reaction to the ECB statement and Draghi's remarks, "While EURUSD traded briefly to a new cycle low, spot’s pullback into previous ranges suggests most key elements of the ECB’s July meeting were in the price. We expect market attention to pivot rapidly to next week’s FOMC meeting," said TD Securities analysts.

"This suggests a sideways trajectory may prevail into that event as investors weigh a precarious balance of medium-term risks."

US data came in better than expected

Ahead of tomorrow's critical GDP data, the US Census Bureau today reported that Durable Goods Orders in June expanded by 2% to beat the market expectation for an increase of 0.7%. Although the EUR/USD pair's rally made it difficult for the US Dollar Index to stretch higher, it remains in the upper half of this week's range and was last seen posting small daily gains above 97.70.

Technical levels to watch for