Unanimous ECB Voting Sparks Euro Rally
Littlefish FX | Jan 10, 2013 05:25PM ET
Given the relative quiet of the week, we had warned that we were building to today and it didn't disappoint.
Although the BoE and ECB left rates unchanged, Draghi's comments on the euro sparked a rally. In general, Draghi's comments were as usual highlighting risks to the downside, same stuff we hear all the time. However, the key to the rally was that there was a unanimous decision to keep things unchanged.
At previous meetings there had been talk of additional stimulus or rate cuts, but this time no such debate was hinted at. This sparked the EUR/USD into life and took the rest of the markets along with it.
EUR/USD
On Sunday (6th) I highlighted the potential for a long EUR/USD entry from last Friday's close.
I also highlighted the key 1.30 level in the EUR/USD. As the 1.30 level held, the EUR/USD charged to the 1.3250 level.
I wasn't expecting it to move so quickly, but with orders broken quickly above the Pivot high, the pair jumped rapidly through the figures.
As per my strategy I have taken part of the position off for 2 reward per risk and will now let the rest run. The pair is now hitting upper resistance and we could easily see some profit taking and retracement from such an aggressive move.
That said, and as previously mentioned, I still remain Bullish this pair and a break through the 1.33 mark could see a further move to the upside. We could now look for a strong upper rejection of the 1.33 handle for short entries or additional long entries on a rotation lower and rejection off of support.
COT still seems to be pointing to further strength in this pair, therefore, a break of the 1.33 could test the 1.35 handle.
GBP/USD
The pound has struggled this week but managed to hold onto the key 1.60 level. Rejections off of this level demonstrated its strength and the pair finally pushed higher with the euro.
We could now see a test of the 1.63 handle. I like the idea of using rejections off of support to buy into a test of 1.63 if risk reward ratios hold.
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Alternatives are a rejection of the 1.63 handle for short entries or a break above 1.63 for additional long entries.
AUD/USD
The aussie pushed higher with most pairs today.
I highlighted we could easily test the upper resistance (all this week) and that looks to be the case, although I preferred the NZD/USD set-up as a trade.
I now like watching for an upper rejection of the strong resistance (weekly swing highs) not far above or potentially long entries from a break above this level. Retail Traders seem to be overwhelmingly short this pair, normally when that happens there is a real possibility of pushing higher and this was no different.
USD/JPY
The yen is showing its weakness once again today. It looked for the most part to be hesitating on the upper resistance it had formed but this broke towards the end of the session.
We now are starting to see some major divergence on the Daily charts which is normally a warning sign. Picking tops is a losing game so I still don't suggest getting short at this point but this is starting to look like it has good potential for a reversal signal.
Weekly also showing signs of potential reversal.
EUR/AUD
Broke higher today but was capped by resistance on the 4hr chart.
For this to break higher from here it will need to break this initial upper resistance in order to open up more room to the upside.
USD/HUF
The USD/HUF pair remained relatively flat today. It is still likely for this pair to move lower from here having tested the upper resistance several times.
4hr also seems to be pointing to a move lower.
EUR/CAD And GBP/CAD
Long entry off of the support played out well, providing 2 reward per risk hitting the T2 mark. I still like this for a move higher to test the 1.32 mark.
Options then exist looking for a rejection off of the resistance level or a break through to consider longs.
Not as nice as the EUR/CAD trade but still pushed higher today.
NZD/USD
The pair continued its move higher today nearly hitting our 2 reward per risk target. I like this to test its upper resistance just above. A rejection of this level could offer short opportunities, a break further long entries.
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