ECB fired on all fronts -refi rate cut, deposit rate cut, QE expansion, LTROs – and delivered the goods that markets wanted.
In response the Euro tumbled across the board. The hourly EUR/USD chart shows the head and shoulder formation was breached and the target was achieved at one go.
For me, the drop is likely to end up being a trap for the bears. I am certainly not expecting a sharp rally, but a rise to near 1.0950 levels as very much possible over the next few days.
I have my reasons for that and they are –
- Monetary easing, especially rate cuts are not well received by the markets these days
- Gold hasn’t reacted positively
- EUR/$ finding support around 1.0945, a level which repeatedly saw influx of fresh bids a few days back
- There is nothing more Draghi can do at press conference
- Hence, in my opinion, we may see another wave of selling and an intraday low of 1.08 before the reversal begins.
I would look to buy anywhere around 1.0845/between 1.0845-1.08 levels for target of 1.0945 with small..very tight stops