Draghi Speech ahead: EUR/Commodity$ pairs preparing for a fall?

The European central Bank President Draghi is scheduled to speak at 6 pm London time. This is the first time we are going to hear from Draghi after he signaled more easing in December, which was followed by a Fed’s December rate hike hint.

Since the Fed’s hint at December rate hike, the odds of a further sell-off in the EUR/USD pair has increased even further, since the focus is back on the divergent monetary policy path.

Draghi’s speech today is important for further clarity regarding a possible action in December. What will be interesting to see is if Draghi plays down December easing bets to some extent or keeps the super dovish tone intact.

It is worth noting that Draghi had expressed concerns regarding 8% rise in EUR exchange rate at the October meeting. However, Fed came out at Oct-end with a hawkish twist and talked up December rate hike bets. The sentiment in the market is now bearish EUR/USD. Hence, there is comparatively less urgency to initiate more easing in December as compared to pre-Oct Fed statement.

Whether Draghi takes into account the increased possibility of a Fed rate hike in December and plays down December easing bets or stays dovish remains to be seen. However, EUR/commodity dollar pairs – EUR/AUD and EUR/CAD are pointing to EUR weakness ahead of Draghi’s speech.

EUR/CAD – Daily chart

• The daily chart shows the pair is flirting with the rising trend line support at 1.4397.

• A bearish break from the triangle is already confirmed, while the pair is also trading below its 100-DMA at 1.4503, which is also the triangle resistance.

• A break below 1.4361 could lead to a quick fire drop to 1.4292 (50% of yearly high-low). The daily RSI below 50.0 points to a bearish move.

• On the other hand, a dip below 1.4397 followed by a recovery and positive daily candle today could open doors for a re-test of 1.4591 (23.6% of yearly high-low).

• Overall, the pair appears poised for a down move so long as it does not see a daily close above 1.4591.

EUR/AUD – Daily Chart

• The daily chart shows the pair has seen a bearish break from the triangle formation, rising trendline and now moves in a falling channel.

• The bearish developments accompanied by the daily RSI below 50.00 points to a sell-off towards 1.50 handle, which at the moment is the falling channel support.

• Fresh offers could continue to flow in so long as the pair does not see a close above 1.5560 (confluence of rising trendline and falling channel resistance).

EUR/NZD – Daily Chart

• Compared to above two pairs, the EUR/NZD appears somewhat bullish on the charts.

• EUR/NZD has already retraced 50% of this year’s uptrend, while EUR/CAD and EUR/AUD have yet do so.

• The pair has repeatedly found support at the 50% fib retracement at 1.6218 since Oct 23rd.

• Hence, it appears poised to quick fire rally to 0.65 handle, above which it may test 0.6770 (38.2% of this year’s rally).

A look at all the three chart says Draghi is more likely to keep his dovish tone intact, while the GlobaDairyTrade Auction due later today may result in a drop in milk prices and hurt NZD.