If you were paying attention yesterday (if not, why not?) you’ll remember I pointed out the the 55 wma and lower trend line at 1.2882 and 1.2860.
Following a dip below both to the 1.2840 area yesterday we are now back above the trend line but below the 55
A close out this week below the 55 will be a big blow to the pair and there will be a good chance we’ll be testing the March lows not long after.
The trend line is holding for now but the lack of any sort of bounce in this run down from the 1.31’s is worrying for the bulls.
The first line of support is down at 1.2837 and resistance is up at 1.2936. If we do manage to get up into 1.29 then we could see a play for the 1.2950 option level which is said to be large (over$1bn)
The first risk today is the EZ inflation report at 09.00 gmt. If we see the year on year drop to 1% or under then we go down. It’s almost going to be a triple negative catalyst.
- Normal circumstances would see a CB cut rates to combat inflation.
- Further negative rate talk will send the euro lower
- With no real margin in rate movements the market will start to think that the ECB is losing control and that will send the euro lower also.
So there’s no real upside to falling inflation for the long euro trade. If the figure remains unchanged then we could see a small pop up, but again I can see that getting well sold into just as I did with GBP/USD yesterday.
If only I backed up my talk with trades yesterday I would have been a very happy bunny.
