Financial Market Research and Analysis

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EUR weakens as ECB tweaks policy
The significant two-sided volatility in the euro has resulted in the victory of the bears. At this year’s last monetary policy meeting, the European Central Bank (ECB) announced to decrease the size of its monthly purchases from 80 to 60 billion euro, yet to extend the program until December 2017, with possibility of a new extension if needed. President Mario Draghi accentuated that this was not a tapering. The EURUSD first rallied to 1.0873, then plunged to 1.0597. Asian traders joined the euro sell-off and pulled the pair down to 1.0589. The EURGBP rebounded from 0.8572 and is gaining momentum for a potential pullback to its 200-day moving average, 0.8370. The EURJPY tanked to 120.90 and is expected to see resistance at 122.15 (daily Ichimoku cloud top) before the weekly closing bell.

The GBPUSD stepped in the bearish consolidation zone after clearing the critical short-term support at 1.2625 (major 38.2% retracement on Nov 26th to Dec 6th rise). Strengthening negative momentum suggests a further extension of losses to 1.2533 (major 61.8% retracement), before 1.2505 (descending channel base building since Dec 6th). Decent resistance is eyed at 1.2605 (200-hour moving average).

The weakness in the USJPY remained short-lived. The pair saw a decent demand below its 200-hour moving average (113.70). The pair should resume its rise to 105.00/105.50. Only light offers are eyed pre-105.00 handle.

The sell-off in EURAUD encouraged a positive pick-up in the AUDUSD. A further recovery to 0.7500 could be envisaged, yet option offers could cap the upside at this level before the weekly closing bell.

Gold slipped to $1164 in Asia. Upside attempts are expected to remain capped at $1175/1180 (200-hour moving average / two-week descending channel top).

Dip-buyers took the rein of the market as the barrel of WTI eased to $50.00. Moving forward, the sluggish supply side dynamics in the oil market could reinforce support at $50.00. The current push could target the $54.50/55.00 mid-term resistance.

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