ECB easing just doesn't mean what it used to mean
While Yellen did her best to stamp on the dollar the euro is still making it count. You also wouldn't think that the ECB adding around a third more to QE was just around the corner either.
We're edging towards are very interesting level up at 1.1400
EURUSD daily chart
1.1400-1.1450 has been a strong area going back to early last year. We've had a couple of breaches but we haven't seen it break and hold for any length of time.
There's going to be a lot of noise between here and 1.1400 but I doubt we're going to come this close without giving it a go. The fact that this level has survived through the Fed 'will they, won't they' hike story in 2015 would suggest that it will take something special to bust it. Would a dovish FOMC next month be enough to do that, if we haven't broken it before then?
I'm liking the level a lot for a short. I see the potential for good reward for fairly low risk. Shorting just ahead of 1.1400 and again just before 1.1450 with a stop just above 1.1500 is how I'd look to play it. It the trade is good then I'd look to manage it down with an initial target of 1.1150.
The risk to the trade is further dovish remarks from the Fed and European data, which again is showing signs of positivity. That tick up in core inflation has been logged.
I think a big clue on the direction will come when the ECB start up the extra QE as another reason for the rise in the euro could be foreign money front running the ECB. We could see some of that lot taking profit into the ECB's increased purchases and then converting their euro profits into other currencies.
Whatever reasons I or anyone can pull out of the air, the main point is that I like the level and I see no real reasons why it should break. I like the RR too and for me that ticks all the boxes for a trade.
