EUR/USD Headed for 1.10 – Keep Selling the Rally

EUR/USD Headed for 1.10 – Keep Selling the Rally

EUR/USD Headed for 1.10 – Keep Selling the Rally

Investors sold euros aggressively today after the ECB lowered its growth and inflation forecasts today. The central bank now expects the economy to expand at a slower pace in 2015, 2016 and 2017. Growth is not expected to exceed 2% in the next 2 years. Their inflation forecasts were also lowered which implies that monetary policy will remain easy. Most importantly, Draghi said that asset purchases can be adjusted in terms of size and duration as needed. Given his concerns about the downside risks and international developments this implie the central bank could step up QE even though Draghi said they did not discuss increasing QE at the latest meeting. However the possibility of full implementation of QE indicates that the central bank has grown more dovish which has and should continue to pressure the euro. US non-farm payrolls are scheduled for release tomorrow and based on the drop in the non-manufacturing ISM report along with the decline in the employment component, the risk is to the downside for the jobs number which should give traders the opportunity to sell euros at a higher level.

Technically, the decline in EUR/USD today stopped right at the 50-day SMA. If the moving average is broken, there is no support until the psychologically significant 1.10 mark. On the upside, there is resistance at Tuesday and Wednesday’s high of 1.1331. Selling anywhere between 1.12 and 1.1350 for a move down to 1.10 is an attractive trade.

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