Sept 5th – Euro signs of topping – ECB meeting couple days away

By | September 5, 2017

This week the long awaited Sept ECB hits Thursday. The market has been pricing in the ECB taper for a couple months now  and expected the details of this at the Sept meeting. Post the US payrolls miss on Fri, the ECB showed their hand. It took all of 10mins post the payrolls for the ECB headlines that the Sept meeting would only discuss the taper and nothing is finalized. Details may only come in the Dec meeting now! The ECB are running scared of a skyrocketing Euro and now need to contain it.  1.2000+ at least  in the short term is a line in the sand for them. The meeting Thursday is certainly going to be a defensive meeting and the traffic cop will bring out the stop sign.

Technically Euro had a spike high above 1.2000. On the daily candlestix we also printed a gravestone doji which is a trend reversal/top formation signal. Also worth noting we have had no closes above 1.2000. So the air is thin above there at the moment and it is being respected as a resistance level. Post the spike high .. the daily closes have bar one closed on the extreme lows. The sellers are winning the daily battles.

There are a few tech breaks to watch out for which will confirm Euro topping. The first is the up trend line that has defined the Euro rally since early April which cits in around 1.1850 now. Break and close below here will be a serious crack to the tech picture. Below that there is a pivot level at 1.1820 which was previous range highs. Break here would be very meaningful as support gaps away and opens a mean reversion trade to the 50 DMA at 1.1680. This is critical support and no doubt stop city waiting below.

Market is extreme long and priced in ECB taper. Disappointment now risks a decent wash out. Longs may start getting nervous and trimming positions pre ECB and the risk. Bias short with stops above 1.2000 going into end of week.