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Today’s Trading Edge: EUR/USD– Draghi Jawbones the Euro Lower

Posted by Edward Moya on Apr 3, 2014 10:57:00 AM

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The ECB kept rates steady but they also queued up that they may be closer to acting.  The initial reaction was a quick 49-pip rally in just three minutes that ended quickly after ECB President Mario Draghi’s press conference confirmed what every analyst knew, that the bank is still strongly considering further easing with conventional and unconventional measures.

If the ECB applies QE, a rate cut, negative deposit rates or narrowing the rate corridor, the euro could plummet against most of its major trading partners with the exception of the Swiss franc.  The comments from Draghi were not all euro negative as deflation risks have not worsened and moderate growth is still expected for the region. 

Last week, the 50-day Simple Moving Average (SMA) provided significant support for the generally rising currency since February.  The downward pressure on the euro is quickly attempting to stabilize at the 1.3700 handle.  When this breaks, key support will come from the 1.3650 level.  The EURUSD daily chart highlights that price may also be forming a bullish Gartley pattern around this area, which also coincides with the 100-day SMA.  Major downside support comes from the 200-day SMA which is close to the psychological 1.3500 handle.   

The trade: Sell EURUSD at 1.3710 with a stop loss at 1.3760 and a take profit at 1.3560  The Risk/Reward Ratio is 1:3

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading

 

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