Yesterday, European Central Bank (ECB) president again dropped a hint that there could be further easing from the central bank. Except for immediate knee jerk reactions, overall reaction in Euro has been muted.
While stock markets, battered by bears, taken the comments on positive stride, Euro bears seems not ready to give in that easily this time around. ECB seems to have lost its re-engineering power to guide Euro lower, with verbal communications/interventions. It wouldn't be unfair to say, ECB has lost its credibility in December.
Another important point to note here, even if Draghi is taken on serious note, which is being supported by the facts, risk appetite returned to market, pushing stocks, commodities higher, over the past years Euro has been battered hard, so market is looking at the size of the actions taken, before pushing Euro lower. Stocks and commodities on the other hand was so battered in recent days, a relief rally could easily follow Draghi's comments.
Change in trade idea
Even if Euro doesn't drop, post Draghi comments, upside may remain capped. So we are dropping our call to buy Euro @1.09 with stop loss around 1.05 area and target around 1.15 area.
We are still in favor of buying Euro, until ECB's March meeting change fundamental drastically but at much lower rate now, around 1.06 and with same stop loss.
