Week in FX Europe – Draghi And Aso Have So Much In Common

On Thursday the Head of the European Central Bank issued a confusing statement. Draghi’s remarks indicated that the ECB might cut its inflation projections as early as next month if the ‘single unit’ continues to appreciate. The market was trading close to 1.36 before dropping two and a half cent. The markets are still trying to digest what actually took place. At the time, Draghi was not referring to current currency levels. His worries were focused on future appreciation.

However, in the mind of a currency trader, they associated a EUR’s rise would weigh down on inflation which could imply further downside risks to an already vulnerable Euro-zone. They therefore created a strong link between the EUR’s rise and future ECB policy.

Structurally, going into the meeting the EUR market was overbought, “buy the rumor, and sell the fact” set in motion an onslaught of EUR repositioning. Draghi’s press conference happened to trigger a plethora of downside stop-loss orders and stop-loss entry positions. ECB’s Draghi and Japan’s Finance Minister Aso just have to open their mouths and give an impression to create an illusion and the currency traders do the rest!




* CNY New Yuan Loans
* USD Consumer Confidence
* GBP Consumer Price Index
* USD Advance Retail Sales
* JPY Nominal Gross Domestic Product
* JPY Bank of Japan Rate Decision
* EUR German Gross Domestic Product
* EUR Euro-Zone Gross Domestic Product
* USD U. of Michigan Confidence Survey
* CAD Unemployment Rate

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.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell