ECB's Draghi explicit reference to sovereign QE last Friday, initially perceived as an option being strongly considered for December's meeting despite the political and legal hurdle, felt a bit overdone, as there was really nothing new being added, other than perhaps the market rushing to assume a more pronounced sense of urgency that Dec could finally be sovereign QE launch time.
After digesting Draghi's comments over the weekend, the market is playing the EUR/USD much more conservatively, aiming to pare positions, with the 1.5 cents liquidity gap - from 1.25+ to 1.2360 - from Friday gradually being erased. Besides, in a week in which liquidity in the market will dry up earlier than usual due to thanks-giving, it may potentially encourage the squaring up of USD longs ahead of the ECB meeting on Thursday next week.
From a technical standpoint, the possibility of buyers emerging on intraday dips was increased by large after the pop through 1.2443/45 on Tuesday, following the publication of another decent US data - headlines and details of the US GDP were solid-. The counter-intuitive move to sell the USD in good news - seen in several occasions throughout the month - is an indication that a crowded USD long market refuses to add fresh positions, with the play probably being that any release in favour of USD buying is an excuse to close longs - by selling USD - at a better price.
While in European hours the calendar exhibits no risk events, the list of market moving headlines out of the US will come from Core Durable Goods Orders, Unemployment Claims and Core PCE Price Index. Expect any dips along the day to find a solid cluster of bids around 1.2442/45 - old resistance turned support - ahead of 1.2425/2400 - origin spike Tuesday -, with potential targets to the upside at 1.25/2510 - stops aimed above? - ahead of 1.2540/60, which should remain an impregnable resistance.
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