Here we are looking to trade the final wave of the flows with ECB ending their QE programme alongside a protectionist US fiscal policy.
From a fundamental perspective:
Softer numbers from EZ on both the inflation and consumer front have driven any odds of a hike in 2018 out of the question.
=> We have (and still are) trading the expectation leg of this move until summer where it is crunching time for the ECB.
=> We are expecting Draghi to confirm September as the final month for QE and EURUSD to drive the currency board for the remainder of 2018, starting late May.
From a technical perspective:
The 1.20xx - 1.19xx handles have plenty of support from smart money who have been tracking theend of QE leg since Draghi's speech in Portugal mid 2017 and we see this as a good buying opportunity with targets as far as the 1.31.
=> We are crashing back at the last breakout point. After the months of volatility compression we are starting to squeeze 'late comers' as the boat was too loaded. The volatility expansion leg will start late May.
=> 1.220x is the only level in play in the sessions before ECB May.
In simple words, this move from 1.19xx -> 1.30xx will come from Draghi triggering the end of QE fact.
...On the other side, the risk to our thesis is EZ inflation not remaining above 1.4. In any other dovish case this will provide a direct move to the lows of the 1.16xx handle with steel support.
@faronf, Yes exactly. Extensions are very common after large compression ranges are broken like the one we've had in 2018.
faronf
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@HayekSystems, ok thx. Side note: if we're at the cusp of 5th wave EURUSD, do you see a bit of a run in gold here too?
RaiseTheBid
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@faronf, Yeap still waiting to get filled there... this time is more tricky as inflation is ticking down in the US so the move in gold is purely via risk.