EUR Trading Outlook
The Euro (EUR) the ECB meeting resulted in a much more hawkish ECB than forecast with Draghi commenting no further easing was on the table and that he expects the work already done by the ECB to filter through to the economy later in 2013. He noted that there was now ‘positive contagion’ in the European debt markets with yields falling on Spanish and Italian bonds in recent months.
The Euro (EUR) fell to day lows at the start of the US session but we found support at 1.3035 before rebounding back to 1.3080. The daily trading range in compressing and we are preparing for fresh direction later tonight with guidance from the ECB. EUR/JPY is back at Y115 after solid support yesterday in Asia.
The Euro (EUR) the buying from 1.3000 fizzled out at 1.3140 even with the announcement by Japanese FM that Japan would be buying European bonds via an investment in the ESM (Rescue Fund). There was no appetite for a further rally and when France downgrade rumors swept the market we saw day lows near 1.3060. EUR/JPY is key for daily direction recently and has been easing from Y116 to Y113.50 overnight.
The Euro (EUR) Euro bears were caught short yesterday with the 1.3000 level holding two attempts and putting a short term base in overnight. Shorts were squeezed back above 1.3120 and could head towards 1.3300 the top of the recent trading range. EUR/AUD and EUR/JPY both supported with strong moves in New York. Some speculation about the ECB meeting on Thursday with a think tank report overnight suggesting the ECB will not cut rates.
The Euro (EUR) the bears tested the EUR/USD to test the 1.3000 psychological support which held and when US stocks rallied post NFP we saw a modest bounce back to 1.3080 in the major. Plenty of support is coming through the EUR/JPY cross which is getting bought aggressively on dips due to the BOJ outlook.
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