EUR/USD: 1.2600The Euro has remained bid, ahead of today's ECB meeting where Mario Draghi is expected to reveal his plans for the ECB to commence a bond buying programme in order to reduce the borrowing costs of the indebted EU countries, including Italy and Spain. Various leaks and reports have been speculated on today about what he is actually going to say, but given the German Bundesbank's opposition to any bond buying it seems unlikely that he will be too specific about the amount of bonds that the ECB will be allowed to purchase. Having said that, - a leak did do the rounds that the bond purchases could be unlimited.
There is quite a school of thought that he will not actually announce anything significant at all and that the market has got ahead of itself in hoping for a positive outcome. If this turns out to be the case, we are going to see a nasty setback in the Euro later on, given the anticipation of what he will reveal. We shall have to wait and see but if the leaks today prove to be correct, the Euro, at least in the short term, looks likely to head a bit higher.
Technically the Euro has traded quite nicely today, first of all moving towards its lows of 1.2501 in Europe after the softer data (EU Services PMI @47.2 against expectations of 47.5, Retail Sales -1.7% yoy agst exp of -1.5%), before bouncing to 1.2623, (halting at the major downtrend resistance), as hopes grew of a positive outcome later on today, when Draghi speaks.
From here, while the hourly indicators remain mildly positive for further gains, the 4 hour charts look as though they are running out of steam on the topside, so it will pay to be pretty flexible later on in the session. The dailies are not suggesting too much either way, although there is still plenty of room for the Euro to move higher.
The points to watch remain pretty much unchanged.
Short term support is again to be seen at around 1.2550 and then again at 1.2510 (rising trendline) and 1.2498 (23.6% of 1.2042/1.22637). Below this is the base of the rising wedge, currently at 1.2435 and then 1.2400 (50% pivot of 1.2742/1.2042) comes into play .
On the topside, sellers will continue to be seen as we approach the recent high at 1.2637,( if/when the 1.2625 downtrend resistance can be overcome). A break would lead to the top of the wedge, currently at 1.2678 and then onto to Fibo resistance at 1.2708 (23.6% of 1.4935/1.2042). Beyond there the 100DMA is currently at 1.2847, and currently looks a long way off, but if Draghi manages to pull a rabbit out of the hat, could come into play.
Right now, Asia and early Europe will be unwilling to play and 1.2575/1.2625 may well cover it. We will then wait for Draghi, and it would pay to be square going into the ECB meeting, beyond which I would not be surprised to see an initial spike higher, before scepticism sets in and pushes the Euro back down.
Don't forget that next week's FOMC is coming into view following tomorrows NFP, and with the anticipation that Bernanke could do something of his own to announce QE3 in the US, the dollar is unlikely to be a runaway train and the Euro will thus be supported on possible dips below 1.25, should we see them.
Aside from the ECB meeting, we also get to see the EU GDP data, which looks as though it will be completely missed, given the focus on Mr Draghi later in the European morning.
