General market theme
Attention turns to Europe today with the ECB meeting and press conference that will follow attraction investors’ focus on how the central bank will act. Recent stabilization in the Euro area might suggest that Mario Draghi will appear conservatively optimistic and refrain from further easing action but the importance of his comments during the press conference will inject volatility in the Single currency. The euro has been enjoying strong gains on the back of the dollar weakness in recent sessions but all this could change should the head of the ECB appear concerned about the future projections on inflation for the Euro area so the stakes are high today.
Price action highlights
The Euro has been treading water over the past 24 hours in light of the important ECB meeting today having reached the 1.1250 area. As we explained above we expect volatility to pick today around the time of the ECB event and Draghi’s remarks during his press conference will take a toll on the Single currency. A possible bearish update on the Eurozone financials might drive the euro lower and the 1.1200 support area will come into focus as the 200-period moving average and previous highs are all located around the same level. To the upside the 1.1300 level should be the first stop should the reaction on the back of the ECB meeting excites traders to buy more euros at this time.
The Cable has been correction over the past 24 hours trading lower after an overextended rally that took the rate around the 1.3450 area. A lower than expected Manufacturing Production reading offset a slightly better than expected Industrial Production report and the pound looked to the downside as profit-taking also kicked in. The UK currency traded to the 1.3350 level and even though a correction attempt took place overnight the short-term outlook might point to the downside for now but we shouldn’t think that the overall bias has changed significantly so any trades should be quick and focused.
Focus of the day
The ECB meeting on monetary policy is of course the main event of the day with the press conference that will follow being equally if not more important. We don’t expect any further easing from the ECB at this time but the projections’ update and Mario Draghi’s future guidance during his remarks will shape euro’s outlook and also take a toll on the European stock markets.
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