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EUR/AUD, EUR/USD Could See ST Reversal while EUR/JPY Remains Weak

EUR/AUD, EUR/USD Could See ST Reversal while EUR/JPY Remains Weak

2014-05-19 11:30:00
Christopher Vecchio, CFA, Sr. Currency Strategist
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Talking Points:

- EURUSD struggling near trendline from November-February.

- EURAUD triangle could see small rally; EURJPY selling rallies.

- Forex economic calendar picks up mid-week.

The most important development of the last week was that, contingent upon the ECB’s June economic projections, the German central bank is reportedly ready to agree to (unprecedented?) non-standard easing measures, even beyond the standard rate cut. A move to negative rates is possible, which would in theory be the strongest long-term lever to keep the Euro pinned down.

Large scale asset purchases could ensue (an ECB twist on the Fed’s QE) to help strengthen the ZIRP environment. To address low liquidity, another round of LTROs is also possible, which proved to be Euro negative in both December 2011 and February 2012.

However, in the very short-term (a few days), with oversold readings versus several of its major counterparts, the Euro could be due for a small reversal, inconsequential to its broader descent. Accordingly, this could be an opportunity to sell a Euro rally; watch the video for a discussion on EURAUD, EURJPY, and EURUSD.

Read more: US Dollar Breakout Yet to Gather Shape - Here's What Needs to Happen

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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