Yesterday’s ECB meeting struck a more “Dovish” tone when all was said and done. The euro market initially reacted to the ECB’s removal of their “pledge to increase bond purchases (QE) if necessary. The ECB also mentioned that QE is set to run until September of this year. The euro erased it’s early morning losses and rose to 1.2453 (March basis). However, during the Q and A session, Draghi lowered his inflation forecasts and further explained that he is ultimately dependent on the incoming data. So with a “data dependent” Draghi, and slower PPIs and CPIs coming in across the Eurozone region, the euro took that as a potentially “Dovish” signal and erased its gains by nearly 150pts. We’ve seen a notable slowdown in the incoming inflation data from Germany, and this morning Italian PPI slowed along with Czech CPI slowing y/y. The euro closed out yesterday’s session at 1.2318, further confirming a “lower high” on the charts and an immediate term bearish set up for the euro. Based on the slowing incoming European data coupled with the blowout US NFP data this morning (313K jobs created vs 205K exp), we believe the euro could trade back down to 1.2200 in the immediate term (1-2 weeks).
Euro Mar ’18 Daily Chart