EU Session Bullet Report – After ECB Fireworks, NFP next

When we prepared the Bullet Report yesterday at the same time, we mentioned that if ECB President Disappoints during the press conference, that a gradual recovery towards 1.0880 cannot be excluded. Little did we know that the recovery wouldn’t be gradual and would not stop until 100 pips above 1.0880.

Yesterday’s trading range on the EURUSD was 462 pips in one day. The last time that the EUR traded even close to this was on March 18, 2015 when it traded in a 456 pip range after the FOMC meeting where the FED hinted on raising rates for the first time. This time, it was the ECB that sparked the fireworks as it only cut by 0.1% when most participants expected a 0.2% rate cut and an increase in the amount of stimulus, which didn’t happen. We noticed yesterday that more and more traders were trying to catch the top, by selling and selling the EUR when it was rising. You should never fight a central Bank. Even if the move seems huge at 200 pips, it may turn to 400 pips a few minutes later. Decisions of a CB like yesterday, also don’t last only one day. When Bank of Japan announced an increase in the QE in Oct 2014, the first day USD/JPY rallied 314 pips while everyone thought they missed the trade. In the next 35 days, it rose by another 1000.

So what’s next after a show like yesterday? Where is the USD heading? Luckily we have also the NFP today and it will be a critical piece of data to close the case for the Fed’s rate hike on December 16. Markets are expecting 198k growth in the US job market in November while unemployment rate is expected to be unchanged at 5.0%.

Green lines are resistance, Red lines are support.

EUR/USD

Pivot: 1.083

Likely scenario: Long positions above 1.083 with targets @ 1.099 & 1.109 in extension.

Alternative scenario: Below 1.083 look for further downside with 1.076 & 1.069 as targets.

Comment: Technically the RSI is above its neutrality area at 50.