FXstreet.com (Barcelona) - Once again, it had to be Mr. Mario
Draghi, President of the European Central Bank, who animated the FX
market to enjoy one of those 'real days of trading' as Euro, and by
association other risk assets, charged higher. The one headline
prompting traders to jump aboard the 'risk on' bandwagon was the
decision by the ECB to hold rates 'unanimous', thus erasing any
possible speculation that the central bank may resume its rate cuts
in the near future.
Jamie Coleman, founder at Forex Live comments on the ECB's
decision: "Draghi did the euro a lot of good in the near-term by
taking a rate cut off the table. But in the bigger picture he's
done the ECB a disservice by leading the market to expect a rate
cut at the December meeting only to change tack nearly 180 degrees
at the following meeting. Central bankers are not supposed to react
to each and every blip in sentiment and it appears that Draghi is
doing just that."
According to Kit Juckes, Head of Forex Strategy at Societe
Generale: "Draghi sounds to me, very much like a man who is 'done'
until something happens. Policy on hold, because the market crisis
is over. The fact that there is no growth and rising unemployment
is something that requires political action, and Super-Mario is
heading the baton over. I don't know how many times I have thought
that if the Euro survives it is doomed to be too strong, but that
is how I still see it."
Technically, Kit believes thatEUR/USD looks set to test 1.33,
adding that "a weekly close above there, takes it on to 1.35."
Supporting the Euro outlook, Kit stresses the tighter spread
between Spanish and German bonds, main driver on Euro's value
today. He believes the trend in bond yields is heading in one
direction, and that is "tighter."
Kathy Lien, co-founder at BKAssetManagement, shows a reserved
stance towards the Euro before going long: "If investors remain
optimistic about the outlook for Europe and Asia, we could see a
fresh leg lower in the dollar as investors dip their toes back into
riskier assets. However, there's quite a big of resistance above
current levels in the EUR/USD at 1.33, 1.3385 and 1.35, so means it
may be better to wait for the currency pair to retrace before going
Valeria Bednarik, in-house chief analyst, notes: "Immediate support
comes at the 78.6% retracement of its latest slide around 1.3230,
and 1.3300 of course, is the key resistance to overcome to confirm
more gains not only in the short term."