Draghi comments encourage EUR bears: Look for positional adjustment ahead of NFP


The EUR fell sharply across the board after the comments from ECB’s Draghi hinted at possible interest rate cuts. These moves are likely to be short-lived as the market is not currently focussed on interest rate plays, as can be seen from the movements in the AUD after the RBA cut rates. EUR bears will try to wrest control back but they will need more than interest rate hints to do so.

EUR/USD has fallen back below 1.3000 but the strong recent uptrend is still the dominant factor. The first support level of note is a 38.2% Fibo level at 1.2950 (see chart). Sell orders are now reported near 1.3020 so I’d use that as the first resistance level ahead of tonight’s NFP.

EUR/JPY has been capped by previous resistance and a barrier at 108.00 and has fallen back towards 106.50, (see chart) the level from where we had the big bullish move last Friday. These remain the two important levels to watch and normally we would expect more downside pressure on a Friday, with a ‘long’ market booking some pre-weekend and pre-NFP profits.

AUD/USD spiked above 1.0500 but was unable to maintain those gains and swiftly fell back as heavy sell orders near 1.0510 took their toll. There are still large stops placed above 1.0525 which may prove magnetic today but the more likely scenario is continued range trading with a modest bullish bias.

EUR/AUD fell very swiftly overnight and looks set to test further important support levels at 1.2310/30 (see chart).

USD/JPY stalled yesterday at corporate sell orders 82.50/60 and was weakened further by heavy EUR/JPY selling. Nevertheless the charts still look bullish with a classic flag formation on the 4-hour chart (see chart) suggesting further gains once the 81.70/82.70
range is broken.

Cable is dominated by option players and their bids at 1.6035/45 held firm again overnight. Usually after an overnight move, option players will adjust their bids/offers levels and I’d suggest that 1.5990/1.6090 might be the new parameters.

Good luck today and TGIF.
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