Caught Flat Footed

Caught Flat Footed

An emphatically hawkish Mario Draghi suggests the ECB policy is on track while all but declaring victory over the Eurozone inflation conundrum.Apparently, the ECB has taken a giant leap towards ending the European Central Bank’s ultra-loose monetary policy, sending the euro and German yields higher as investors piled into the Euro as the ECB hints that the end of crisis-era stimulus measures is upon us.The markets vigorously repriced Eurozone assets sending EURUSD  rocketing higher led by EURJPY which traded at the highest point in over a year.

The voracity of the move suggest traders were caught flat-footed given the ensuing scrum for topside EUR exposure.And while we should expect some profit taking,  the next logical destination for EUR JPY is likely a test 128 as the market continues repricing  EUR assets.

Competing for headline space, Dr Yellen did not rock the boat, but the dollar looks increasingly vulnerable and could topple at the slightest wobble in US economic data. Dollar Bulls could l be in for a reality check when  PCE comes into focus at week’s end more so if the soft inflation narrative plays on.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Senior Currency Trader and Analyst at OANDA
Stephen has over 25 years of experience in the financial markets and specializes in Asian currencies at OANDA. After having started his trading career with NatWest Bank, he is currently based in Singapore as a Senior Currency Trader and Analyst with OANDA, focusing on the movement of the Aussie Dollar and ASEAN Currencies. Stephen has an extensive trading experience in Interest Rate Futures, Money Markets and Precious Metals. Prior to joining OANDA, he worked with organizations like Cambridge Mercantile, Nat West, Garvin Guy Butler, Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes
Stephen Innes

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