… Bear toy back to the box?
Twisting a little bit the market axiom that says “you can’t fight markets” for “you can’t fight confidence”, we can see what this move was really all about.
President M.Draghi directly agreed that the bloc is transiting difficult times, which more likely would extend into the present year, but – and is a big ‘but’ – he also expects some sort of recovery, enough at least to eclipse the likelihood of another rate cut from the actual 0.75% in the near term. True, fundamentals in the euro zone as a whole and in the core members are either stalling or retreating… so does this matter? Apparently not. Yesterday’s injection of confidence boosted the risk appetite in such a way that overwhelmed every bearish perspective or gloomy forecast, only leaving room now for bets on which will be the next resistance the EUR/USD would penetrate. A first glance we see 1.3308 en route towards the vicinity of 1.3380
This new – and mandatory - bullish vision on the cross is also supported by declining borrowing costs in former troubled debt markets like Spain and Italy, putting increasing distance between the ECB’s OMT programme and a Spanish request for financial aid.
Risk-on mode is sharply on, and there’s nothing reality can do.
Technically speaking, analyst Karen Jones at Commerzbank assessed “We will ideally see failure circa 1.33085 for a slide back to the 1.2970-1.3000 key support. This is the location of the 6-month uptrend, the 50% retracement of the move up from November and the 55 day ma”; while the Bullish Percentage Index, developed by the research team at FXstreet.com, jumped yesterday to indicate that 78.95% of euro-based pairs are now in bullish mode, according to point and figure patterns.