EUR/USD is undergoing a sharp reversal, making a quick drop of over 176 pips. This move came after a move up following the announcement of the ECB about its huge 3 year LTRO operation. The euro strengthened towards the release and accelerated on it.
There was a big buildup that culminated with an even bigger-than-expected outcome. But then the market “sold the fact”.
In a move looking like indirect QE, the ECB allotted 489.92 billion euros for banks for three years, with an exit point. Early estimates stood on around 300 billion. Banks pledged collateral, including lower grade sovereign debt. .
Also Italian and Spanish yields are going up – a bad sign. Spanish yields are ticking up to 5.10%. Italian yields are around 6.70%.
Old/new rumors about a French downgrade are also weighing on the euro, but this certainly isn’t new.
The thin volume towards the holiday season in the Western world is also enabling these relatively sharp moves. Serious trading volume will return only in the first week of January.
- Levels in both directions: Below 1.3044/55, 1.3006, 1.2975, 1.2945, 1.2928.
- Above: 1.3092, 1.3155, 1.3175, 1.3240
- 1.2945 is the trough reached after 1.30 was lost, but the really important support is the YTD low of 1.2873.
By
M.Zohaib Gadit
Forex Trading Consultant
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