Once again, it had to be Mr. Mario Draghi, President of the European Central Bank, who animated the FX market to enjoy one of those "real days of trading" as the euro, and by association other risk assets, charged higher. The one headline prompting traders to jump aboard the "risk on" bandwagon was the decision by the ECB to hold rates "unanimous", thus erasing any possible speculation that the central bank may resume its rate cuts in the near future.
Jamie Coleman, founder at Forex Live comments on the ECB's decision: "Draghi did the euro a lot of good in the near-term by taking a rate cut off the table. But in the bigger picture he's done the ECB a disservice by leading the market to expect a rate cut at the December meeting only to change tack nearly 180 degrees at the following meeting. Central bankers are not supposed to react to each and every blip in sentiment and it appears that Draghi is doing just that."
According to Kit Juckes, Head of Forex Strategy at Societe Generale: "Draghi sounds to me, very much like a man who is 'done' until something happens. Policy on hold, because the market crisis is over. The fact that there is no growth and rising unemployment is something that requires political action, and Super-Mario is heading the baton over. I don't know how many times I have thought that if the euro survives it is doomed to be too strong, but that is how I still see it."
Technically, Kit believes thatEUR/USD looks set to test 1.33, adding that "a weekly close above there, takes it on to 1.35." Supporting the Euro outlook, Kit stresses the tighter spread between Spanish and German bonds, main driver on Euro's value today. He believes the trend in bond yields is heading in one direction, and that is "tighter."
Kathy Lien, co-founder at BKAssetManagement, shows a reserved stance towards the euro before going long: "If investors remain optimistic about the outlook for Europe and Asia, we could see a fresh leg lower in the dollar as investors dip their toes back into riskier assets. However, there's quite a big of resistance above current levels in the EUR/USD at 1.33, 1.3385 and 1.35, so means it may be better to wait for the currency pair to retrace before going long."
Valeria Bednarik, in-house chief analyst, notes: "Immediate support comes at the 78.6% retracement of its latest slide around 1.3230, and 1.3300 of course, is the key resistance to overcome to confirm more gains not only in the short term."