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20 Nov 2015
By Ipek Ozkardeskaya
Draghi hints at Christmas package
Earlier in the session, the euro-dollar was better bid on suspicion that the ECB President Draghi may not satisfy the very hawkish market expectations regarding the Eurozone’s monetary policy. Yet Draghi’s early words successfully delivered the dose of dovishness that the euro-bears were craving for.
Mr. Draghi charmingly blinked saying that the ECB will do ‘what it must’ to raise the inflation quickly. Implicitly, Draghi hinted that the expansion in the bond purchasing program is certainly around the corner by the end of the year. There may even be deeper negative rates under the Christmas tree this year.
His words curbed the early appetite in the euro-complex. German 2-year bund yield dropped to a record low. The widening divergence between the Fed and the ECB’s monetary policy outlooks paves the euro’s path to the south by the end of the year. The euro-bears are not ready to hibernate this December.
The upside attempts in the euro are expected to remain fragile against both the US dollar and the pound. Only surpassing 1.0790 (Fib 38.2% on Oct 30– Nov 18 decline), the EURUSD will technically step in bullish consolidation zone and could push for further gains to 1.0860 / 1.0960 (21dma / minor Fib 23.6% on Dec’14-Mar-Apr sell-off). The mid-term direction remains bearish with unchanged target at 1.0500/1.0450 zone. Against the pound, the 70 cent shelters a large volume of vanilla put expiries.
The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please note that 71% of our retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing money.
