=> After a dovish ECB we can see the removal of some large macro support at 1.133 which implies the prospect of a fresh leg lower. => After the sharp fall yesterday we managed to close below the November uptrend and Early January low to raise the odds of this consolidation range resolving lower. => Here we are actively looking for areas of interest, and below we see support at 1.1269 ahead of a move back towards the 2018 low at 1.1215. If both are taken we unlock the scope for a retest of the 61.8% retracement at 1.118. => It is important to note that in our 'bigger picture' we see EURUSD moving higher later in the year so these areas are all going to encounter support and should hold as long as expectations for rate differentials narrowing remain intact. => Should we break below we would see a resumption of the bear trend that started in 2018 and the next key support comes in at 1.1143. => Resistance is initially seen at 1.1339 and 1.1425. Above here is necessary to see the market start to trade back within a range and improve odds of any meaningful upside. => Best of luck to those who are trading the ECB flows, attached you can find our macro maps and ideas for the coming quarters in Europe.
Thanks for the interesting analysis. I have a question. Why do you think the euro will appreciate on the dollar in the second half of the year?
The rate differential is in favor of the dollar.
Unless you think a Eurozone split is plausible, which includes the euro as a "core" currency exclusively from Germany and France.
ridethepig
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@mgiuliani, Good question. As you rightfully mention the rate differential is massively in favour of the dollar currently. As per today we are not expecting any hikes from the EZ till 2020 at the earliest. I am effectively outguessing the second half of this year, after Draghi leaves we will start to trade the 'expectation' leg of a Q1 2020 hike as early as summer 2019. Hope this helps.
The rate differential is in favor of the dollar.
Unless you think a Eurozone split is plausible, which includes the euro as a "core" currency exclusively from Germany and France.