This week consists of one of the busiest schedules we have faced in a while, and either out of utter genius or sheer idiocy, I scheduled a short vacation several months back starting on Wednesday, so I'm missing out on most of the fun this week. But regardless, we've got too much on the platter for me not to have any form of excitement. The month of August is notorious for harsh movements and lower liquidity, so it is only fitting that we start it off with a bang:
Of greatest interest is the ECB rate decision on Thursday and not just for the decision itself, but any “auxillary” measures to be mentioned in the press conference directly thereafter. On Friday the market got a whiff of what yet another rate cut would look like for Europe, with rumor swells sinking EUR/USD appx 100 pips before the session close.
Specifically, we're looking for further bond buying via the ECB's Securities Market Program. The simple mention of possibility that this might happen is what punched the Euro higher (in a seemingly uncontrollable manner) last week and causing the flags to show up all over our charts. The actual mention of it is now likely to have a muted, or just null effect on price. Part of the reason behind this is the fact that it could be considered already “priced in”.
But more importantly, late on Friday, we received word that ECB President Draghi was proposing a plan that would include a rate cut, alongside the already-known-about bond purchases. Those two actions would essentially nix each other out, with the rate cut taking precedence over the long haul. Thus, any further mention of rate cut would have a downward effect on Euro.
Anything that could have a positive effect on the pair? Yes, any current talk getting exaggerated (even more bond buys) or nixed (no possibility of a rate cut).
QE3 and the Fed not of greatest interest, you say? I can't say I share the enthusiasm of every other blogger whose heads are constantly in Ben Bernanke / The Fed attack mode so out of pure disgust of listening to people whining about what they are going to do next I'll leave the speculation to the side for today. All I do know is that the US's major data, while starting to taper off from euphoria, still isn't as ugly as half the world wants it to be as the facts state otherwise.
Oh, and non-farm payrolls. Can't forget that one. That's an at-the-moment talking point, however, so I'll let it be for now.
Need I say it be volatile and I tend to taper off longer term positions during times like these. My chart below has 2306 marked up (23% of the last leg in reverse), a few obvious trendlines, and stop levels (2225-20 was the last one and got hit today/faded). Right now the buying pressure has tapered off but I'm expecting some nuttiness around month end, not to mentioned everything previously mentioned, so it looks like short term plays for me tomorrow. I threw a MACD on here as we might start seeing some reverse divergence on any pullbacks for a heads up.
I'm also watching 96.52 and 97.00 on EUR/JPY to coincide with any EUR/USD action. 96.52 is tech confluence where 97.00 is a touted stop level, also with confluence.
AUD/USD, the engine that never seems to quit, has stops at 1.0550 and again at 1.0600. 1.0550 coincides with 76.4% of this last major leg.