Stay strong Euro shorts. Technicals still intact. Target 1.05
Eur has had a wild day today. We saw its typical overnight strength until Draghi's prepared remarks were released just after 3:20am EST. A few key quotes sparked a 55bp drop to below 1.07:
The message was clear: asset purchases will be extended past September 2016.
Eur gained a little strength as the morning wore on, but the real strength didn't show up until oil started moving lower. If oil is down big, prior to the open, equities tend to follow. As such, the carry traders (despite the FT's insistence they don't yet exist) have to unwind their shorts. The Fed speak was rather dull, albeit slightly dovish. Still, Eur's strength today is a function of carry trade unwinds. No technical damage has been done. Three attempts at the prior high of 1.07889 failed to hold and I expect to see equity markets finish the day off the lows and Eur to retrace lower to the 1.0740 area (100 bar MA on the hourly chart).
Fischer speaks tonight. I don't expect his comments to walk back a December move. The real show comes tomorrow w/ German, French, Italian and EZ GDP figures followed by the holy grail of US Consumer Spending and the less important PPI and UMich Consumer Sentiment data. The retail sales number will be our next opportunity to test the 1.0660 level.
- "inflation dynamics have somewhat weakened"
- "Signs of a sustained turnaround in core inflation have somewhat weakened"
- "sustained normalisation of inflation could take longer than we anticipated in March."
The message was clear: asset purchases will be extended past September 2016.
Eur gained a little strength as the morning wore on, but the real strength didn't show up until oil started moving lower. If oil is down big, prior to the open, equities tend to follow. As such, the carry traders (despite the FT's insistence they don't yet exist) have to unwind their shorts. The Fed speak was rather dull, albeit slightly dovish. Still, Eur's strength today is a function of carry trade unwinds. No technical damage has been done. Three attempts at the prior high of 1.07889 failed to hold and I expect to see equity markets finish the day off the lows and Eur to retrace lower to the 1.0740 area (100 bar MA on the hourly chart).
Fischer speaks tonight. I don't expect his comments to walk back a December move. The real show comes tomorrow w/ German, French, Italian and EZ GDP figures followed by the holy grail of US Consumer Spending and the less important PPI and UMich Consumer Sentiment data. The retail sales number will be our next opportunity to test the 1.0660 level.
Trade closed manually:
Closed my Euro shorts. Oil is not getting a bid, SPX should roll over and that's not good for carry-traders. Will look for new higher levels to re-enter the short.