The main events of the week are not even here and the market is going all over the place with the EURUSD being the main mover.
Trading the EURUSD pair this week was/is quite a challenge due to a lot of rumors from within Europe. As for the North American side, despite strong fundamental data all week, we saw the EURUSD rising after releases with lows made on Monday’s opening still present.
So what should you look for next? We believe the ECB (European Central Bank) holds the key this week.
The ECB is due to set the monetary policy for the next month on Thursday, and traders should therefore focus on the following scenarios:
- Will the central bank announce any kind of additional easing, especially QE (Quantitative Easing)? The most likely answer is NO. The reason for that is the difficulty of a central bank representing different economies to go and buy bonds issued by different Governments. If you were to buy a bond, which country would you start with? That is a key question as, regardless of the answer, the other ones are going to step up and challenge this. No agreement means no solution.
- This week’s markets were influenced by rumors that European central bankers are not happy with Draghi’s leadership style and will challenge him at the next meeting. Personally, I would disregard such “news” as they can be downplayed by the market just like that. Take the EURUSD for example, on the above rumor, it soared to the 1.2570 area, only for the next day to slip back to 1.2460.
- is EURUSD going to break the previous 1.2437 lows? Most likely: YES. The reason for that stays with the fact that we are living in a trading world dominated by HFT (High-Frequency Trading), and algorithms that are trading both technical and fundamental analysis and stop hunting are the tips for today. Where would bulls on a move to 1.2570 place the stop losses? We suggest to 1.2437 as this is where this market is going.
- is the EURUSD a good buying opportunity once the 1.2437 is broken? Most likely: YES. The reason for this comes from the fact that we are already in almost mid-November and markets are going to range for a while here as the end of year trading is looming. This means profit-taking, and in order to close a short position, one needs to buy.
Of course all of the above is speculative, but this is how one should prepare to go into a big event such as the ECB meeting. After that, the next event to be aware of is the NFP (Non-Farm Payrolls), which are due on Friday. But more about these in our next Forex news piece next time.
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Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
