quantguy
Short

ECB Cuts Rates, Expands QE: What this Means for the Euro

FX:EURUSD   Euro Fx/U.S. Dollar
I've felt that the Euro             dollar has been overvalued ever since the ECB disappointment in December which sent its value soaring. Even Draghi himself noted that was not his intent. With interest rates lower yet again and QE             expanded, where is the end? About 25% of the world's GDP producing countries have introduced negative interest rates and this has been the case for some time in Northern Europe. It seems the 'virus' of negative interest rates is spreading and infecting those clinging by a thread.

Is there any sign of hope for Europe? The massive influx of immigrants (thanks again, Merkel), political instability, Greece concerns (with Portugal and Spain not far behind), and weak inflation do not paint a good picture.

Using technicals, one could have forecasted the decision by noting the bearish head and shoulders pattern, but clearly hindsight is 20/20. Note that this is a 30 min chart. If you check day level granularity you see EURUSD             has a lot of room to tumble, with a head and shoulders-ish pattern forming at this level too.

Typically with massive moves like those pictured, we can expect a pause, followed by continuation up until a level drawn by the fibonacci extension, followed by a slow retracement (what I call the sickle pattern). We can expect to see something like this here, but keep in mind there's really no good news coming out of Europe and parity with the dollar seems like an inevitability at this point. I'd wait until the ECB decision frenzy subsides, then short into rallies. You don't want to get caught in a short covering dead cat bounce.
Ideas Scripts Chart
United States
United Kingdom
India
España
Italia
Brasil
Россия
Türkiye
日本
한국
Home Stock Screener Economic Calendar How It Works Chart Features House Rules Moderators For the WEB Widgets Stock Charting Library Priority Support Feature Request Blog & News FAQ Help & Wiki Twitter
Private Messages Chat Ideas Published Followers Following Priority Support Public Profile Profile Settings Billing Sign Out