Good morning traders.
In terms of statement announcements the ECB appeared not to provide TLTROs at as low a rate as some were thinking therefore less dovish. However, they did push guidance on further rate policy out until mid next year from the end of this year although this was not taken initially as a reason to weaken the eurusd as it also probably means they will not cut either. Also, current thinking on the Fed cutting rates up to 3 times in the same period lessens the divergence between them on monetary policy.
During and post the press conference we got some initial further upside as Draghi said economic data was “not bad” (less bearish) but also said they were ready and prepared to adjust any instruments in the face of changing conditions. Also some members raised the possibility of rate cuts but it seems they are more prepared to sit on the sidelines for now unless anything adverse hits the buffers. The remainder of the session and overnight saw eurusd coming off its highs.
On the whole the markets have taken the ECB as not thinking of specifically cutting rates anytime soon and being fairly balanced on conditions. Thus the eurusd was initially bid in relation to the recent seemingly more dovish Fed position but retraced much of the move during the aftermath..
My thinking, Draghi was balancing the situation with a slight hint to optimism but was sufficiently pragmatic to note that they will do whatever is needed should should the situation change. Pretty much covering all bases :).
Anyway, who cares, anything that gets the market moving up or down is good for us. Hopefully it will ring in increased volatility which just makes our job a bit more interesting and gives us more room for firing off some trades from good levels.
As ever with these central bank meetings unless there is anything clear signalling either a hike or a cut the market will make its own mind up and we will get some movement up and down as the market auctions opinions and bets. All good stuff.
Now, where does this leave us regarding making some money?
The 200 SMA, the declining trend line and the big fig at 1.13 are all conspiring to cap price at the 1.13 and under level. A clean push and a daily close above would be the first indication that we could break out above to higher levels.
Today’s NFP could help if we get a big miss as the USD may weaken further as the Fed mulls potential set backs in employment and the economy and becomes even more inclined to consider rate cuts. On the other hand…. (haha yeah you’ve guessed it), a big beat could push it the other way. Whatever happens the important thing is to have the scenarios in mind before the event so that you are better placed to take advantage.
Levels as per.
We didn’t quite reach the range limits I´d set yesterday for S & R1 and again we need to be mindful of the key event data hitting the decks at 14.30 CET. Any first touch of S or R1 before the event is more likely to hold for fades than afterwards. Therefore be careful during and after NFP as we could get a momentum push which makes these levels less resilient to tests. If we get either being tagged prior to NFP I would treat as a scalp and make sure you capture some profit and don’t necessarily hold for model returns.
Thats a wrap for this week. Pretty quiet on the results front for our model strategy but plenty of scalp opportunities set up.
Ok amigos – have a great weekend :).