Richard Perry
Independent Analyst
The euro has continued its sideways trading, although yesterday’s session was a little more volatile than for much of the past week. News of the ECB QE plan were leaked yesterday and the euro spiked around 100 pips higher and lower before settling in much as it was during the morning. This has left us with more consolidation on the daily chart, however I would expect this consolidation above $1.1460 and now below $1.1675, to come to an end this afternoon, possibly just after 1330GMT (when Draghi begins his press conference). This is likely to then blow all technicals out of the water (at least for the near term). What to expect? With the market anticipating something in the region of €500bn of QE, any indication of a programme bigger than that could send the euro tumbling. The reports of €50bn per month until the end of 2016 would mean around €1 trillion, which may not have been entirely priced in yet. The volatility could come with an announcement of QE which the market may see does not go far enough (maybe more than €50bn per month could have been injected) and then we move into the realms of a disappointment rally for the euro. Even then there could be a “sell on rumour, buy on fact” reaction. Whatever the outcome it is sure to be a volatile reaction as traders try to work out the implications.
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