The Euro continues losing ground after the ECB press conference
As the new week kicks off, we have had a fairly quite first day of the trading week as most of Europe was on holiday for Pentecost. However as the second day of the week is here, we are back with our forecast and trading the main currency pairs. We are starting with the EUR/USD and its ability to trend in this market.
For now we would be keen on baying daily put options, unless we see a sustained hourly close above the red line on our chart, which currently stands around 1.3620. The support level is the daily low from yesterday when we saw prices drop swiftly in London trading to about 1.3580.
After the ECB has committed to a lower exchange rate during its press conference it has remained rather reluctant to persist in its calls towards some form of quantitative easing. While buying asset backed securities has been hinted upon, for now it is not reality and this would be the best course of action to stem deflation.
The Euro is to suffer from this in the long run. There is no determined schedule as to when and where can we expect it to drop further, however current economic headwinds in the Euro Zone area are likely to persist. Governments would need to cut taxes materially before growth can be restored to more robust levels.
The main news on the calendar are surrounding some major central bankers speeches. The European Central Bank's Governing Council member from Finland Erkki Liikanen speaks at the Bank of Finland’s quarterly briefing at 8 GMT, and ECB Governing Council member Jozef Makuch speaks in Bratislava at 12 PM GMT.
Luxembourg's Yves Mersch will be speaking at a panel at the Brussels Economic Forum at 3 GMT. While the data calendar is pretty benign, we are to focus on technical levels. If we see a decisive break above 1.3620 we can take daily call options positions, however if that doesn't materialize, remaining on the put side is smart.