What a few trading days it has been. Other than the GBP gaining significantly against the Yen, the Euro was able to trend higher courtesy of hawkish king Draghi. Just like the Feds, Draghi was quick to point out that deflationary forces were transitory and over time, prices should start rising. What this meant was that the ECB was confident and positive of their inflation expectations being met. This also mean that chances of tapering and consequent removal of “soft landing” in which equities were reaping big from will be lightened. As the Fed begin with balance sheet reduction and the ECB moving away from QE, the Euro should appreciate as equities which are on record highs retrace. I’m following this with some interest especially now that German bond yields are rising from the dregs-followed closely by the 10 year treasury bills- and see if this will be sustainable. If US and Eurozone bond yields continue to appreciate then the Yen will be under considerable pressure and should continue to weaken. Remember after Draghi’s comment yesterday, Germany’s 10 year and 2 year bond yields rose to their monthly highs after that blanketing optimism of political stability and broad base recovery in the Eurozone. In my opinion, there is a recalibration and a new price tag being fixed on Eurozone assets and with this, the Euro should continue to appreciate and that is why, I’m bullish on the Euro.
Technically, the weekly chart is mixed and that is why I will base my analysis on the monthly chart which is king. The stochastics are moving from oversold territory with a clear break above minor resistance in the daily chart. Bullish momentum is obviously strong in the monthly chart and the same is happening in the daily chart where prices are making a higher high. My strategy is simple and I will buy and target recent highs of 1.52 as my first take profit with possibilities of reentering in case of a retracement.
I will trade as follows:
Stop Loss: 1.49
Take Profit: 1.52 with ideal TP at 1.54
Carney, Draghi and Poloz talk today so it’s a pretty eventful day for GBP, EUR and CAD bulls. What out for what they have to say. We also have Pending Home Sales and Crude Oil inventories from the EIA. Poloz speech in my opinion should supersede whatever is reported from EIA