The euro displayed another subliminal performance across the board on Tuesday, leaving open-mouthed many market participants due to the incessant heavy purchases seen since early in the last London session at $1.3460.
According to Sean Lee, founder at FXWW,
all of the big Prime Brokers are reporting very solid EUR demand across the board and Sovereign players were noted buyers of EUR/USD at the overnight lows near $1.3465.
The recovery comes in the wake of an ongoing scandal hitting Madrid over illegal payments received by the Spanish Prime Minister Mariano Rajoy and high-seniority officials from his ruling party. That fact, coupled with the upcoming ECB monetary meeting, led to a wave of analysts sharing cautious views on the possible euro price activity ahead of the meeting.
However, a trend is your friend and reality slapped euro bears right in the face. This rally has never felt as if having reached its full maturity, with Monday's sharp fall being more a matter of an overextend overbought correction, combined with speculators' stop loss hunting practices (although well disguised on political turmoil headlines out of Spain) than anything else.
The fact that the euro managed to rally hard just 2 days before the ECB bodes well for euro longs, as it suggests that, unlike other occasions when market participants would opt to be sidelined awaiting risk events, confidence remains high that no stone will be found on the way up by any setback from the ECB on EUR-negative comments, thus keeping EURphoria strongly alive.
According to Ivan Delgado, head of Asian analysts at FXstreet.com,
the euro is back on track, technically well positioned to launch another attack towards recent trend highs. The vigorous rebound off lows has been nothing short of astounding, and with such bullish momentum hard to fade, the pair should be well supported on shallow dips.
Ivan adds that "one hint over the current commitment of buyers was seen through Tuesday's American session, when a pullback to $1.35 was graciously welcomed by value hunters." Traders should now be aware of a break above $1.36, which would allow a retest of $1.37. Break beyond the latter unlikely to see participants committed until the ECB's outcome on Thursday.
Kathy Lien, co-founder at BK Asset Management, notes that the key focus on this week's central bank meeting will be on the value of the currency, thus "making this meeting and press conference by Mario Draghi extremely important for the euro's near term outlook." In the meantime, Kathy thinks that "the EUR/USD appears poised for another move above $1.36."
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.