No changes from the ECB on monetary policy, but traders are pushing the euro lower, making this simple chart setup on EUR/USD one to watch for the session.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/AUD ahead of the ECB rate decision, so be sure to check that out to see if there is still a potential play!
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
| DAX: 13549.00 -0.05% FTSE: 7583.48 -0.36% S&P 500: 3336.97 +0.49% DJIA: 29304.35 +0.37% |
US 10-yr 1.724% -0.047 Bund 10-YR -0.305% -0.046 UK 10-YR: 0.597% -0.045 JPN 10-YR: 0.001% +0.004 |
Oil: 56.99 -2.38% Gold: 1554.90 -0.193% Bitcoin: 8336.04 -3.41% Etherium: 161.62 3.01% |
Fresh Market Headlines & Economic Data:
- U.S. weekly jobless claims rise modestly; labor market solid
- White House has started work on second round of tax cuts to boost growth, Mnuchin says
- ‘Brexit finish line’ crossed as British parliament passes EU Withdrawal bill
- ECB holds rates as strategic review gets underway
- EU can do a trade deal if UK keeps level playing field, Gentiloni says
- Oil falls as spectre of China virus looms over fuel demand
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- EIA Crude oil stock change at 4:00 pm GMT
- Australia Manufacturing & Services PMI at 10:00 pm GMT
- Japan Inflation at 11:30 pm GMT
- Bank of Japan monetary policy meeting minutes at 11:50 pm GMT
- Japan Manufacturing & Services PMI at 12:30 am GMT (Jan. 24)
What to Watch: EUR/USD
The European Central Bank just released their latest monetary policy statement, keeping interest rates on hold and announcing a review on its monetary policy strategy. The initial reaction was a pop higher in the euro, but the last couple of hours, euro bears have steadily taken control, evident in price action on EUR/USD, today’s top watchlist pair for the U.S. – Asia session.
On the one hour chart above, we can see the pair breaking below a tight consolidation range of around 30 pips on today’s news. Given this move is off of a top tier catalyst, the odds are pretty good momentum traders will hop on this signal for at least a short-term short play. With the daily ATR of around 45 pips, there’s potential for this pair to run lower to the major psychological level of 1.1000 from its current level around 1.1060, making the potential return-on-risk very attractive for a short-term trade if using the daily ATR as a stop guide.
For the bulls, there isn’t much arguments for a bullish run with ECB Lagarde being less hawkish than expected as there was no mention of moving away from negative interest rates and that the ECB’s economic growth outlook is still “tilted to the downside.” If a fresh catalyst does appear during the session to push the euro higher (or the Greenback lower), then a break above the consolidation area will be the signal to do a little more work and consider a long position in EUR/USD.
