Huge Profits on Euro after ECB Adjustments

Huge Profits on Euro after ECB Adjustments; Will NFP Report Complete Fed’s puzzle?

The euro shocked the markets on Thursday, recording unprecedented gains in a very short period of time following ECB’s decisions announcements. That was a painful trading session for the euro bears as the euro surged more than 400 pips against the dollar, touching a fresh-month-high, after testing the key support level of 1.0525. The EUR/GBP pair surged more than 1.5% following the announcement while the EUR/AUD rose more than 600 pips, to end the day slightly below the psychological level of 1.5000. A similar picture prevails in EUR/JPY as the pair soared above the key level of 1.3000, to close the day near the 1.3450 area. Technically, the euro indicators are now looking more positive although it is likely to be another highly volatile session with the NFP report coming up during the US session.

ECB Fresh Stimulus Measures! Draghi said: More adjustments if necessary
The ECB President Mario Draghi unveiled the new stimulus measures will be taken to boost inflation towards just under 2% and the Eurozone’s recession. The central bank cut further the deposit rate and extended the bond-buying program. The deposit rate, which banks use to make overnight deposits with the Eurosystem, decreased by 10 basis points to -0.30% from -0.20% before, where it was since September 2014. Moreover, the bond-buying program extended at least until 6-months to March 2017 and the range of the assets purchased broadened and further adjustments could be made if necessary. The ECB also raised its GDP forecasts for 2015 and 2016 and decreased the inflation forecasts to 1.0% from 1.1% in 2016 and to 1.6% from 1.7% in 2017.

NFP Report to hog the limelight! Will complete Fed’s puzzle?
The Non-Farm Payrolls report today is equally important and will complete the Fed rate-hike puzzle. The market forecasted the economy to have added 200k non-farm jobs in November from 271k jobs the month before. The average hourly earnings are expected to have grown by 0.2% while no change is expected to the record low 5% unemployment rate. If an NFP number below 200k comes out a confusion will flood the markets, whether Fed will start raising rates in December or later in 2016. However, a number above 200k will culminate the odds for a rate hike at the next policy meeting starts on December 15 and ends on December 16.

EUR/USD – Technical Outlook
The single currency has appreciated more than 2.5% on Thursday following the ECB policy meeting. The euro surged from session lows of 1.0525 (suggested target) to overcome easily both the 4-hour 50-SMA and the 200-SMA, as a consequence to turn the negative outlook to bullish ahead of the US NFP report. The psychological level of 1.1000 remains under threat, as well as the 1.1100, which includes the 200-SMA on the daily chart. It’s remarkable that the euro has erased all of the losses made after the FOMC meeting, where the December US rate hike was strongly anticipated.

In the recent reports, we have changed our stance for the euro from bearish - 1.0525 recommended target before the ECB - to neutral bullish - 1.0700 and 1.0800. Both of the targets were reached! 

"EUR/USD: Profit locked – waiting for Draghi’s speech"

The announcement of the ECB interest rate decision caused heavy and unprecedented volatility to the EUR/USD pair. The pair jumped 200 pips in matter of minutes reaching the target we suggested in an earlier report â€œEUR/USD remains under pressure!”.

The central bank left the benchmark interest rate unchanged at 0.05% but cut the deposit rate to -0.30% from -0.20% was since September 2014. It is very likely more stimulus measures to be announced by ECB President Mario Draghi during his scheduled press conference at 13:30 GMT. 

Economic Indicators
Today we will have another volatile day for the week due to the awaited US Non-Farm Payrolls Report. It will be the last employment report before the Decembers Fed’s rate decision so the figures are very important and will affect all the USD related pairs as well as the USstock indices.

The Canadian employment report is also coming out but will be overshadowed by US report again. The unemployment rate is expected to remain unchanged while the economy is forecasted to have added0.7k jobs in November from 44.4k in October.