Mario Draghi Thug Life:
Even when leaving rates and asset purchases on hold, the big happy family that we call the European Union can always be relied upon to deliver on volatility for traders.
The ECB left the benchmark interest rate at 0.0%, the deposit rate at -0.4% and kept asset purchases steady at €80 billion per month which was all the same as last month. This was as markets had expected.
But the real entertainment came during the press conference, when a visibly frustrated and at times angry Mario Draghi went on a full blown offensive in reply to the latest comments from the German Finance Minister Wolfgang Schäeuble.
Schäeuble had last week questioned the ECB’s current policy of record low interest rates, raising concerns of German pensioners and savers who have seen their capability to save severely handicapped over time.
But Super Mario was having none of it, raising his voice as he fired back:
“Any time the credibility of a central bank is perceived as being put into question, the result is a delay in the achievement of its objectives – and therefore the need for more expansion.”
Draghi may have already fired the last rocket from the ECB’s QE bazooka, but he wasn’t going to let that stop him from firing off a few rounds from the pistol at his hip… at his own men.
So what about the charts? The Euro chart that we’ve been following on this blog and the @VantageFX Twitter has this big range on the daily which I wanted to add some context to.
Although it is a short term range in its own right, the level has significance on the weekly chart from all the way back in 2003. (What were you doing in 2003?!)
Anyway, zooming into the daily chart and the intraday spike has printed a daily long wick into resistance.
Draghi’s public confrontation with Schäeuble is significant for price. It reflects the ECB’s stubborn willingness to stay on a course that obviously isn’t working as expected. Draghi says that it’s a matter of time, but the markets don’t agree.
Data/news affected candles such as these should be taken more cautiously on their own, but the fact we came out of the level and couldn’t make a new high is significant. Could the stars could be aligning for Euro shorts?
Chart of the Day:
We talked yesterday about Obama possibly weighing into the debate on whether the UK should stay or leave the Euro. But it was instead Draghi who lent his voice to the issue, highlighting that the uncertainty caused by the referendum was having an impact on markets across the Euro.
The Cable daily chart has hit short term resistance and was rejected spectacularly. Mark your levels and manage your risk around them accordingly.
Zoom in on your own MT4 charts to the lower time frames and take a look at how the level reacted.
On the Forex Calendar Friday:
EUR French Flash Manufacturing PMI
EUR French Flash Services PMI
EUR German Flash Manufacturing PMIE
EUR German Flash Services PMI
EUR Flash Manufacturing PMI
EUR Flash Services PMI
CAD Core CPI m/m
CAD Core Retail Sales m/m
Dane Williams – @VantageFX
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