Mario Draghi’s comments sent the Euro rocketing higher against the U.S. dollar during Thursday’s ECB press conference. We were anticipating some strength given the daily close above 1.2325 on Wednesday.
Another key level I mentioned in that mid-week commentary was 1.2525. Seeing the single currency print 1.2537 at the height of Draghi’s presser, I figured it was only a matter of time before sellers took an interest.
It was also apparent that the EURUSD had become stretched. I often talk about using the 10 and 20 EMAs as a mean reversion tool, and at 1.3537 the pair was more than 300 pips from the mean.
I even thought about shorting the pair at 1.2525 but decided not to buck the trend. As it turns out, it would have been a decent short-term trade.
It’s my personal view that the commonalities between these crosses and others suggest a stronger yen over the coming weeks. Visit the links above to see how I’m approaching each one.
As for the EURUSD, prices could go either way at this point. The pair is currently trading in the middle of the 200 pip range between 1.2325 and 1.2525.
Thursday’s bearish rejection candle hints at some weakness, but with the 1.2325 support level just below current prices, I have no interest in selling. Going short here would also be severely against the grain.
In summary, today’s price action indicates a stalemate between buyers and sellers, and the Japanese yen crosses may provide a better outlet going into next week.