EURUSD- Ready to Crumble?

EURUSD- Ready to Crumble?

Chart Of The Day

Mario Draghi destroyed the euro today but essentially telling the market that despite the best economic growth in years, he wasn’t ready to pull the plug on QE just yet. By extending QE to 9 months into 2018 Mr. Draghi dashed any hopes of an early taper and broke the hearts of euro bulls.

The damage done to the currency today wasn’t just fundamental but technicals as well as it broke the 1.1700 figure and now rests just ahead of the key 1.1650 support. With Fed clearly on a path to more rate hikes, while the ECB remains a non-player for all of 2018, the prospect of further interest rate differential between the two currencies will only expand and could push the EURUSD quickly towards the key support at 1.1500 level.

Today’s policy courses suggests that the euro is strict sell on rallies trade for now, unless US policy suddenly turns dovish as well.

EUR/CAD Ready To Crumble? (Click Chart to Enlarge)

EUR/CAD Ready To Crumble? (Click Chart to Enlarge)

Chart Of The Day

Fundamentals

The euro was hammered today on concerns that the disinflationary pressures in the EZ are going to force the ECB to ease further and perhaps even to consider the possibility of negative interest rates at its next meeting this week. With the exception of Germany the EZ continues to remain in funk with growth in the periphery essentially nonexistent. Even in Germany, the regions largest economy, consumer demand remains tepid as Friday’s Retail sales showed. With German Retail sales declining by -2.4% versus 0.2% eyed, the market is concerned that final demand in the region could slow markedly in Q1 of this year. Meanwhile in Canada the economic news may finally show a ray of sunshine. Canadian GDP grew at 2.6% as forecast alleviating fears of a further slowdown and news that the Keystone pipeline may get approved suggests that the country’s energy sector may get a much needed boost. After hitting a high of 1.1200 USD/CAD may be finally ready to correct. All of this suggests that EUR/CAD which just broke below the key 1.5000 level could be headed lower over the next week.

Technicals

Technically, EUR/CAD broke the key 1.5000 level which suggests that the near term bias is now negative. The pair is capped by recent highs above the 1.5300 level and could target 1.4800 as the week proceeds.