Skip to content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
Oil - US Crude
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Trade Setups in EUR-crosses Ahead of ECB Meeting

Trade Setups in EUR-crosses Ahead of ECB Meeting

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- EURUSD short covering possible if ECB strikes optimistic tone.

- EURGBP, EURJPY offer most immediate bearish setups.

- See the April forex seasonality report.

As long as yields in the Euro-Zone continue to fall, and equity markets around the world rally, one would expect the Euro to continue to weaken. We may see a slight blip in that trend today thanks to the the ECB meeting, insofar as policymakers may view the stronger economic momentum in the short-term (the Citi Economic Surprise Index for the Euro-Zone currently resides at +55.7) and improving lending conditions (loans to non-financial corporations in the Euro-Zone only fell by -0.7% y/y per the most recent data in February, up from the -1.7% y/y three-months earlier and -3.8% y/y at the trough in July 2013) as reasons to be more optimistic about prospects for 2015.

The fact of the matter is that the continued presence of low nominal sovereign yields is the crux of the recovery, and any optimism the ECB brings forward will come with the ever-important commitment to seeing the €60 billion/month QE program to its conclusion in September 2016. Any commentary that suggests the QE program could be tapered – be it borne out of supply concerns or growth optimism – could cause a sharp Euro rally (shorts remain prevalent at 215.3K net-short contracts among speculators), a drop in equity markets, and yields to rise, especially in the periphery, which would surely send inflation expectations plummeting, thereyby undermining any progress seen to date.

It's in the ECB's best interests to downplay the scope of the recovery, and therefore, any rally see around the ECB meeting should prove short-lived.

See the above video for technical considerations in EURUSD, EURJPY, EURGBP, and EURAUD.

Read more: USD Breakout Contingent on Retail Sales, Tone at ECB Meeting

--- Written by Christopher Vecchio, Currency Strategist

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

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES