EUR/USD: 1.2630The ECB left rates unchanged, and as had been previously leaked, Mario Draghi announced in the post meeting conference that the ECB has agreed on the a new bond-buying program, targeting bonds with maturities of one to three years. There will be no limits on the size of the bond purchases, nor will there be any cap on yields.
With his announcement coming in largely within expectations, and with little further detail being unveiled, the Euro initially sold off sharply but eventually regained its feet to hit a two month high as the market perception to remain positive towards the plan and it currently sits just beneath the session high of 1.2650.
The Equity markets all liked what they saw today, with the Dax closing +2.91%, the FTSE +2.11% and the S+P +1.98%.
Looking ahead, we have the all important German constitutional ruling on the EU bailout fund that will take place next week, on Sept. 12, which will keep traders wary and could well inhibit further gains for the Euro between now and then.
The ECB also today, lowered GDP forecast for 2012 to a range of -0.6% and -0.2%. For 2013, GDP change is projected to be in range of -0.4% and 1.4% Elsewhere, the US ISM data came in much stronger than expected, as did the the US ADP unemployment data and if that were to flow through to tonight's Non Farm Payroll data, we will see a rally in the dollar as any potential for QE3 recedes.
Technically the price action today has been pretty choppy, although in the bigger picture not too much really has changed, and despite the new 2 month highs, we have actually only marginally taken out the 31 August, 1.2637 high, and currently sit just below that level.
Momentum is, by and large, fairly positive and it would seem that we may push on to the first resistance at the top of the rising wedge, currently at 1.2693 and then onto to Fibo resistance at 1.2708 (23.6% of 1.4935/1.2042). Beyond there lies the 50% retrace of the 1.3483/1.2042 decline at 1.2757 and then the 100DMA is currently at 1.2857.
The downside sees support at today's low, 1.2560 and then again at 1.2520 (rising trendline) and 1.2498 (23.6% of 1.2042/1.22637). Below this is the base of the rising wedge, currently at 1.2455 and then 1.2400 (50% pivot of 1.2742/1.2042) comes into play .
All will be on hold now until the NFP data later today where the expectation is for a gain of 125K, while Unemployment is expected to remain at 8.3%.
Overall, the short term indicators, while looking mildly positive, are showing divergence and warning against being too long at these levels. I would therefore be fairly flexible and keep stops reasonably tight as sooner or later I suspect we shall see a reasonable correction to the downside for the Euro, although that may not happen until next week.
