FXstreet.com (Barcelona) - Well, apparently dead cats do bounce!
The bloc currency has left everybody perplexed after yesterday's
'needle-like' upside, breaking above the prevailing consolidation
pattern around 1.3050 to climb more than two big figures to the
boundaries of 1.3280. ECB President Mario Draghi surprised the FX
community once more, this time confronting the expected dovish tone
with a more straightforward thinking about his views regarding the
future of the euro area in the present year.
… Bear toy back to the box?
Twisting a little bit the market axiom that says "you can't fight
markets" for "you can't fight confidence", we can see what this
move was really all about.
President M.Draghi directly agreed that the bloc is transiting
difficult times, which more likely would extend into the present
year, but - and is a big 'but' - he also expects some sort of
recovery, enough at least to eclipse the likelihood of another rate
cut from the actual 0.75% in the near term. True, fundamentals in
the euro zone as a whole and in the core members are either
stalling or retreating… so does this matter? Apparently not.
Yesterday's injection of confidence boosted the risk appetite in
such a way that overwhelmed every bearish perspective or gloomy
forecast, only leaving room now for bets on which will be the next
resistance the EUR/USD would penetrate. A first glance we see
1.3308 en route towards the vicinity of 1.3380
This new - and mandatory - bullish vision on the cross is also
supported by declining borrowing costs in former troubled debt
markets like Spain and Italy, putting increasing distance between
the ECB's OMT programme and a Spanish request for financial aid.
Risk-on mode is sharply on, and there's nothing reality can do.
Technically speaking, analyst Karen Jones at Commerzbank assessed
"We will ideally see failure circa 1.33085 for a slide back to the
1.2970-1.3000 key support. This is the location of the 6-month
uptrend, the 50% retracement of the move up from November and the
55 day ma"; while the Bullish Percentage Index, developed by the
research team at FXstreet.com, jumped yesterday to indicate that
78.95% of euro-based pairs are now in bullish mode, according to
point and figure patterns.