General market theme
The main event of yesterday’s session was the ECB meeting on monetary policy and the press conference that followed with Mario Draghi explaining the bank’s way of thinking and providing their future guidance. The ECB left rates unchanged and made no other changes in their policy at this time however the press conference had something to offer as Draghi appeared more bearish than expected and left the door open for further easing “should it be needed” down the road. As a result the initial uptick in the Euro reversed quite quickly when he took the stage and we could expect a possible further correction depending on how capable the Dollar is to capitalize on this opportunity.
Price action highlights
The Euro spiked to the upside when the ECB left interest rates and current QE levels unchanged as investors took it as a sign of strength and progress and the rally took the currency to the 1.1325 area for a brief period of time. However when Mario Draghi started speaking to the press core traders quickly sensed his slightly bearish tone and when he hinted that further easing could be applied if necessary the Euro reversed to the downside. The reversal sent the Euro to the 1.1240 area and even though the Single currency pulled back higher overnight we believe we could see a further correction to the downside with the 1.1200 area of support being the first target.
The Cable extended its correction to the downside yesterday and pushed towards the 1.3300 area with decent momentum. The Pound has been under pressure for the past couple of days after an impressive rally higher and we think we could see a little bit more of a push lower at this time especially if the Dollar gets some support now that Euro’s outlook took a blow from Mario Draghi’s forward guidance. The 1.3250 area will come into focus being a recent support level and the 50% retracement level of the previous uptrend.
Focus of the day
Looking at the economic calendar for the day ahead there’s really nothing to be excited about as the only piece of important news will come from the UK and the Trade Balance data levels are not expected to be a market-moving report. We expect traders to take their cue from yesterday’s news and look to capitalize on any opportunities that stemmed from Euro’s weakness on the back of Draghi’s comments.
"Disclaimer: The information provided by InvestingBetter.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. InvestingBetter.com are merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite.
InvestingBetter.com and/or its owners will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on InvestingBetter.com. InvestingBetter.com does not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought."