Trade Leader Alex Kazmarck of SpotEuro presents forex market analysis.
Euro top at 1.40 seems to be the magic number. Today, ECB President Draghi signaled during the Q & A part of the press conference that if inflation continues to come in at such low figures, the ECB is comfortable acting in June, sending the euro plummeting 100 pips. While we’ve seen the euro bounce back several times over the past few months, today’s price action is pointing to a more fundamental shift in policy. He also verbally intervened in the euro’s high exchange rate, saying that it plays a very large role in inflation figures and that something may have to be done about it. Very important to keep an eye on June staff projections and inflation figures during the next few weeks.
Ukraine situation has recently been given a helping hand as Russian President Putin asked the Eastern Ukrainian population to hold off on the May 11th referendum; however, it seems the vote will go on anyways and I’m cautious at this temporary relief rally that we’ve seen in equities.
I continue to be bullish on the USD and today’s bounce in the Dollar index seems to have made clear that the bottom lies at the 79 level. Still, today’s markets are very dynamic, with many moving parts. Short term positions could see more volatility in the near term.
Some charts to keep in mind during the next few weeks. Presented with little commentary.
While certain strategies could work very well in this market, specifically longer-term fundamentally driven, it’s been difficult to hold on to certain shorter term ideas. I think there are a lot of risks that have not been accurately priced in that are currently reflected in today’s record low European bond yields (Italy). While there could be a lot of volatility ahead of us, I think the opportunity lies in the US Dollar, not only for safe haven reasons, but more fundamentally in the economic recovery, which may or may not hold. It should be a win-win situation as a safe haven play and as a recovery play.
Support: 1.3810; 1.3700; 1.3500