Euro at 11 year low (and heading lower) after ECB QE announcement. Equities higher.

The long awaited ECB QE programme has now been revealed, and with Mario Draghi announcing an asset buying programme of Eur 60 bio per month commencing in March and continuing until September 2016, the Euro has duly headed sharply lower. Global equities liked what they saw and have all seen a decent rally, with the Dax at all time highs. The theme seems to be to expect more of the same over the coming weeks, with direction today to be provided by the global manufacturing flash PMI’s, led off by China. The UK gets the December Retail Sales, and later on, from the US we get some secondary data: Chicago Fed National Activity Index, CB US Leading Indicator, Existing Homes Sales. Have a good w/e.

EUR/USD: 1.1373

After leaving rates on hold, the ECB Mario Draghi duly announced that the ECB will begin its QE programme by buying Eur 60bio in assets per month in March, until September 2016, totalling around Eur 1 trillion and which will include government bonds, debt securities issued by European institutions as well as private-sector bonds.

Following a brief squeeze to the session high of 1.1650, the Euro has since collapsed to a low, so far, of 1.1362, (now at 1.1315) and although oversold in the short term, looks to have plenty of downside potential yet to come.

In reaching the day’s low, the Euro has met the initial objective, after now having reached the (Nov 2003 low) with the next target being the major Fibo support at 1.1227 (61.8% of 0.8225/1.6037), with precious little elsewhere to hold it up ahead of there. That should be decent support and may hold it here for a while, but if broken, the next target will be at 1.1000, where many analysts have been looking for a 2015 low, although the next realistic technical level is not seen until the September 2003 low at 1.0759.

Rallies look to be rather limited, although the market is heavily weighted to the downside so we are going to get the odd short squeeze along the way. Above 1.1400, the first hurdle will be at 1.1460, last week’s spike low, and then at 1.1540, which held the Euro up for the first half of yesterday’s session. The descending trend resistance is now at 1.1565, and although this looks unlikely to be tested today, it will come under pressure at some stage over coming sessions as it heads lower.

In the meantime, there may be no let up on the downside for the Euro today, with the release of the EZ Flash Mfg PMI’s, which will be followed over the weekend with the Greek election, where a left-wing victory is looking increasingly likely.

Stay short and sell rallies still seem to be the theme. Personally I think parity is looming and beyond that, I think we are heading to 0.8000, but this maybe a 2016 trade.

Economic data highlights will include:

EZ Markit Flash Mfg PMI’s, Chicago Fed National Activity Index, CB US Leading Indicator, Existing Homes Sales.

Meta Trader – AxiTrader   EUR/USD: 4 Hour

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USD/JPY: 118.44

US$/Jpy has been choppy, in trading a 118.34/117.24 range, although we are currently sitting near the top end and looking as though we could yet head higher.

Having said that, there is some decent resistance immediately ahead, with the minor descending trend resistance sitting at 118.50 and then the daily cloud top at 118.70, which has pretty much capped the last two days, although the dollar did reach a high of 118.86.

If/when 119.00 is taken out, then further gains towards the recent highs at 119.30 and then at 119.95 (8 Jan) will come into view, and further out look for a run towards 120.00 above which will suggest further gains towards the minor triple top at around 120.75. At this stage I doubt we are heading towards 121.00, but if/when we do, further advances towards the trend high at 121.85, a break of which would see a run towards the 15 July 2007 high at 122.42. In the longer term, the target of 124.13 (17 June 2007 high) would appear on the horizon but will take time given the resistance levels sitting in between.

On the downside, 118.00 will again be the immediate short term support, below which would see bids at the 100/200 HMA’s at 117.85/117.63 ahead of the session low at 117.25. A break of that, which I doubt we will see today, would take the dollar down to the previous session low at 117.17 low and then to 117.00. Below there would suggest a run towards the rising trend support at around 116.50 and then to 116.00 and possibly to the Fibo support at 115.50 (38.2% of 105.18/121.84).

Overall, the focus is currently elsewhere and it maybe a choppy session, with the Nomura Mfg PMI being the main focus. Look for 118.00/119.00 to cover it.

Economic data highlights will include:

Nomura Flash Mfg PMI.

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GBP/USD: 1.5016

Following a brief spike to the session high of 1.5212, the ECB’s QE launch helped to drive Cable lower, in sympathy with the Euro, to below the Jan 8 low at 1.5033, in today reaching a low so far of 1.5014, where it currently sits.

A test of 1.5000 seems more or less inevitable, with today’s UK Retail Sales (exp-0.6%mm, +3%yy) possibly being the catalyst, and should this be the case, then look for a quick stop loss hunt to 1.4970 and then a run towards 1.4915 (61.8% of 1.3502/1.7191) and eventually to the July 2013 low at 1.4813.

If we get a short squeeze, then back above the previous trend low at 1.5033 sellers will gather at minor 1.5050/1.5075 levels ahead of 1.5100 and then the 100/200 HMA’s at 1.5132/1.5157.

Rallies appear to be limited and if we see 1.5050/75 again I would be tempted to use it as an opportunity to get short, with a SL placed above 1.5100. The indicators all appear to be lining up for a move lower.

Economic data highlights will include:

UK Retail Sales.

Meta Trader – AxiTrader    GBP/USD: 4 Hour

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USD/CHF: 0.8718

US$/Chf has been pretty sidelined today, although it is currently nearer the top end of its range.

There is no change in view and I would avoid this pair right now.

As before, for those wanting to be involved, the wide range of 0.8400/0.8900 currently looks to have it covered, albeit that liquidity is still thin and I think it probably sensible to give it a wide berth.

In the bigger picture, while I still like the US$, buying dips towards 0.8300/0.8200, should we see it would seem to be a plan. If/when the Euro (EurUsd) heads lower, towards 1.10, and possibly to parity, then even US$Chf may find the legs to head back towards 0.9000/0.9500. Keep positions very small, or avoid it altogether.

Meta Trader – AxiTrader     USD/CHF: 4 Hour

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AUD/USD: 0.8053

Having bottomed out at 0.8055 in Asia yesterday, following the Bank of Canada’s surprise rate cut, which saw the Aud weaken in sympathy with the $Cad, it then  bounced to 0.8135 ahead of the ECB announcement but has since given up all those gains and is currently back near the lows.

There have been some rather bearish observations out with regards to the Aud recently; last week Blackrock said it was heading sub 0.7000, and yesterday ANZ noted the critical week coming up, with the growing potential for the Aud to soon head below 0.8000. An ANZ note to client’s stated that  “Should next week’s business confidence and CPI numbers look as soft, as we anticipate, a more sustained RBA easing cycle will be priced, and the AUD will break through USD0.8000”.

Before any data next week, keep an eye out for today’s HSBC China Flash Mfg PMI. Forecasts call for an improvement to 49.6 from December’s 49.5 reading although this would still indicate a contraction, while a reading coming in below expectations would suggest further weakness for the economy and would pressure AUD/USD further.

For the time being the Aus is holding above the session low at 0.8055, and more importantly, it is still above the recent trend low of 0.8032 (7 Jan) although I dont see either of these hanging on for very long today. Below here, the downside momentum would look to carry the Aud below 0.8000 and on towards the important Fibo level at 0.7944 (61.8% of 0.6006/1.1080), below which, we then are headed to the July 2009 low at 0.7700 and beyond,  possibly to the RBA’s stated target at 0.7500, albeit not for a while.

The topside will see resistance again at 0.8100 and at the 0.8135 session high. If the US$ maintains its general strength, then above here will be tricky, but further targets would appear at the 100/200 HMA confluence at 0.8170. Beyond here, 0.8200 currently looks out of reach, unless we see a decent sell-off in the US$, but were that to be the case, then further sellers would arriver at 0.8230 and at Friday’s high of 0.8255, ahead of the recent minor highs at 0.8273 and 0.8298, with the next Fibo resistance not seen until 0.8321 (38.2% of 0.8795/0.8033). Beyond this, the breakout level from below the base of the long term channel is seen at 0.8350 and should be strong resistance – and a decent sell opportunity – if seen.

Economic data highlights will include:

China HSBC Flash Mfg PMI.

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NZD/USD: 0.7506

The Kiwi remains very heavy, having now broken below the 100 Month MA (0.7550) although it has so far held onto 0.7500 (low 0.7496).

Down side momentum appears to be building, possibly for a big move, with the first port of call being 7435 (61.8% of 0.6560/0.8842) and then at 0.7325 (38.2% of 0.4892/0.8842).

The topside will find sellers at 0.7550 and then at 0.7580. I doubt that we are heading above here today, but further rallies could take us back to 0.7600 and maybe to 0.7620. Above here would indicate a near term base has been reached and could see further upside momentum, although at this stage I don’t see it happening.

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