EUR Trading Outlook
EUR/USD Tight ranges held in Europe's morning but NY began the session by applying bull pressure on broad USD weakness and speculation that the ECB will disappoint tomorrow. The pair rallied to the 1.1640/50 area before spec and reserve manager offers pushed the pair a bit lower. The gains were erased in no time though as an EZ source was quoted as saying the ECB executive board proposed bond buys of 50bln per month. EUR/USD dived down to the 1.1560/65 support zone but quickly bounced as the headline also stated the proposed buying wouldn't start until March. Also noted in a BBG headline was that the buys would go through the end of 2016. The pair spiked to a 1.1680 high but those gains eroded as the USD recovered on a rally in US bond yields. EUR/USD then revisited the 1.156 area. The support held again and the pair lifted towards 1.1600 late in the day. All eyes are now on the ECB and what type of QE, if any, is initiated. If the market is disappointed EUR/USD should see a big short squeeze and the 1.1850/00 zone come into play.
EUR/USD The pair held to a relatively tight range for Europe & NY but EUR/USD did lean a bit bearish for both sessions. Europe dropped the pair from the 1.1615 area towards 1.1575 as NY got going. JPY weakness in early NY pushed EUR/JPY towards 137.65 and this took EUR/USD back above 1.1605 for a brief period. Bears emerged though as broad USD strength was the dominant theme for NY. EUR/USD steadily slid lower and tested 1.1540. Very little bounce was seen as the pair lingered near the lows late in the day. There is little econ or event risk for Europe & NY that would drive the pair so traders will likely look to external factors. The UK sees the MPC meeting and the BoJ Monetary Policy statement are the main risks for EUR. As it stand the long-term bear trend remains but some consolidation is likely into the ECB. RSIs are o/s and need unwinds but the market still looks to sell rallies and the pair struggles on moves above 1.1630/40. We may have to wait until Thursday to see if the next bear leg takes hold of is a big short squeeze runs its course.
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