EUR/USD Rally on ECB QE Unexpected, DAX Plunge Worrying, NFPs Imposing?

Talking Points:

• A rally from the Euro on ECB stimulus not incomprehensible given the market's exaggerated expectations

• Troubling is the seeming slump in risk trends despite a central bank expanding its support

• Beware volatility and a departure from 'simple' fundamental interpretations moving forward

See how retail traders are positioning in the majors in your charts using the FXCM SSI snapshot.

Fundamentals do not always play out as the textbooks suggest they should. The EUR/USD's incredible rally this past session is perfect illustration of that incongruity. The ECB announced a significant upgrade to its already remarkable dovish monetary policy position. And yet, the pair posted its biggest rally in over six years backed by the heaviest spot volume on record - and the second most intensive turnover in futures over longer historical tracking. This move contradicts the primary fundamental theme drive that we have come to expect over the past 18 months; however, it is not a complete anomaly. Investor expectations stretched belief and positioning to levels that were difficult to match. Perhaps the more disconcerting development to follow this past session's event risk was drop from the DAX and global equities. While FX traders - playing relative policy stances - may have been disappointed, general risk aversion in response to more central bank support may speak to a more systemic over-saturation in speculative appetite. Ahead, the NFPs looks threatening against such an unsettled backdrop and aggressive speculation of Fed liftoff. We look at the big moves behind and ahead in today's Trading Video.

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